"Cement manufacturers have agreed to hold the price line at current levels for one year," Kamal Nath told reporters after a meeting with cement makers.
Companies that had already raised prices would keep the increase, but if the government were to reduce levies producers would lower their prices, he said.
"They also agreed that if any concession is given to them by way of excise duty and other statutory levies, they would also pass on the benefit entirely to the consumers," he said.
Analysts said the move would undermine cement companies because of rising energy and transportation costs. They had earlier estimated cement prices to go up by 35 percent in 2007, after rising 30 percent in October-December from a year earlier.
"It's going to hit all companies irrespective of region," Hitesh Agrawal, analyst with Angel Broking, said. "They can't increase prices for one year and FY09 will not let them do it as we expect additional capacities to come in."
Shares in Grasim Industries Ltd., which along with its subsidiary UltraTech is India's biggest cement producer, dropped 7.4 percent to 2,069.15 rupees in a Mumbai market that slipped 1.3 percent.
ACC Ltd., the second-biggest cement maker, ended down 6.3 percent at 780.85 rupees while smaller rival Gujarat Ambuja fell 2.6 percent to 109.95 rupees.
India has more than four dozen big cement makers running about 365 plants with a capacity to make 165 million tonnes a year. About 30 million tonnes of new capacity is expected in the next two years.
The government said that cement makers had pledged to add 100 million tonnes of additional capacity in the next three years at a cost of 400 billion rupees ($9 billion).
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