Economy

Cement cos seek export sops to ease oversupply

Suresh P. Iyengar Mumbai | Updated on February 14, 2011

CEMENT   -  Businessline

50% freight subsidy sought for transport of cement and clinker from factory to port

The cement industry has sought export subsidy from the Government to overcome the surplus situation created by the capacity additions. Though India produces cement of international standards it is not competitive mainly on account of high-level of taxes and duties imposed on it. The Indian cement industry is the second largest in the world and exports to over 30 countries.

The Cement Manufacturers' Association (CMA) has demand 50 per cent freight subsidy for transportation of cement and clinker from the factory to port, as most of plants are located in the hinterland.

Capacity additions

Cement companies have added a capacity of 89 million tonnes in the last three years taking their installed capacity to 265 million tonnes per annum. The companies are expected to add 35 million tonnes of capacity by FY-13. Consumption was 179 million tonnes last fiscal.

Ms Vinita Singhania, President, CMA, and Managing Director, JK Lakshmi Cement, said, “The industry recorded the highest ever capacity addition of 37 mtpa in the last fiscal and we are confident that the demand would pick in about a year's time.”

To give a fillip to sagging exports, the CMA has sought exemptions from customs, port and bunker charges. The Association has requested the Government to lift charges incurred on posting of customs officials at captive ports and jetties on complimentary basis since these ports are revenue earners for the Government.

Investments made in developing private jetties and ports for cement export result in de-congesting national ports. Thus the investment made for the creation of such assets should be allowed a higher rate of depreciation, besides including Duty Entitlement Passbook scheme to incentivise clinker export.

INPUT COST

The industry has demanded that the import duty on coal, pet coke, gypsum and other inputs should be brought down to zero from five per cent imposed currently.

The cement industry has been subjected to perennial shortage of coal, the main fuel during the last several years, with only 50-55 per cent met through linkages. The balance is either imported or procured in open market via e-auction.

The areas of concern really are the unabated rising cost of energy, transportation and availability of adequate raw material which are becoming increasingly difficult, said Ms Singhania. While cement can be imported duty-free, major inputs are taxed at much higher rates.

Similarly, the overall supply position of railway wagons to the cement industry is much lower than the requirement even as the direct and indirect cost of railway transportation continues to rise, she said. In December, the Railways changed the classification of cement resulting in 4-5 per cent rise in the transportation cost.

Though steel and cement are equally important materials needed for construction activity, the VAT rates on steel and cement differ vastly. While VAT on steel is only 4 per cent, VAT on cement and clinker is 12.5 per cent. Further, steel enjoys ‘declared goods' status while cement and clinker are excluded, she said.

Published on February 14, 2011

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like