Cement prices up Rs 10/bag

Cement has become costlier by about Rs 10 a bag in most markets across the country in the last 20 days.

At present, the retail price for a bag is at Rs 265-75 in Mumbai, Rs 285-295 of Kolkata, Rs 245-55 in Chennai and Rs 270-75 in Hyderabad, according to industry sources.

The reason behind the increase was the replacement of existing excise duty rates with composite rates have an ad valorem and specific component as proposed in the Budget which, in effect, results in higher excise duty.

Apart from Budget impact, there are other reasons as well. “The prices had gone up as the recent increase in the input costs had to be passed on to the buyer. But I think, the current price could be stabilised for some time,” Mr Srinivasa Rao, Chief Finance Officer, Rain Commodities Ltd, told Business Line .

Demand-supply dynamics

According a senior official of a major cement firm which has a joint venture with a foreign player, the demand-supply dynamics would not provide for any further hike in the near future.

“In the Southern markets, supply is 20-30 per cent in excess of demand due to inflow of additional capacities. This will not allow price hike. There will be pricing pressure on the companies at least for next two/three quarters,” he said.

According to the Cement Manufacturers Association (CMA) data also points out to surplus supply at the national level.

While cement production between April 2010 and Jan 2011 was at 136.51 million tonnes, the despatches were lower at 135.56 million tonnes.

In the year-ago period, the production and despatches were at 130.85 million tonnes and 130.09 million tonnes, respectively.

When contacted, a CMA functionary said, “apart from additional capacities in the South, the demand has not gained momentum due to a variety of factors including slow-progress of Government schemes in States where elections have been announced and the slow-down in the real estate and construction.”

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