The cement industry has expressed concern about the Railway Ministry’s proposal to pass on the rising costs of fuel on to the freight tariff.

Apart from the potential to drive up cost of freight, industry representatives were worried about the “uncertainty” this would introduce into the freight cost.

N. Srinivasan, Vice-Chairman and Managing Director, India Cements, said the move “leaves the industry in suspense” on the “frequency and basis of hike.” It is as if the freight hike will be a matter of routine, “to be effected administratively” each time fuel price goes up.

A.V. Dharmakrishnan, CEO, Madras Cements, said freight costs account for nearly 28 per cent of the sales cost of cement. The move to hike freight is a serious concern for the industry which depends on movement of inputs and raw materials and final product heavily on logistics.

Cement is a “high volume, low value” product that is produced in only 8-9 States because of natural resource availability but is moved across the country. Governments need to look at the cascading effect a frequent hike in freight will have on all downstream products. There is a huge tax component that goes hand-in-hand with the fuel price hike, he said.

balaji.ar@thehindu.co.in

(This article was published on February 26, 2013)
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