Economy

Cement prices may go up Rs 10-12 a bag

Suresh P. Iyengar Mumbai | Updated on March 01, 2011

cement prices

The Budget move to reshuffle excise duty on cement may push up retail prices by Rs 10-12 a 50 bag and add to the cost of construction. The Government's decision has come at a time when the cement industry has been finding it difficult to overcome the falling demand and rising input cost.

Ms Vinita Singhania, President, Cement Manufacturers Association, said the Budget has been quite a disappointment and was further compounded when the Finance Minister mentioned the measures as relief to the cement industry.

“We believed for a moment that the industry's long pending demand of abatement on the excise duty has been finally heard by the Government. The specific component is very much on the higher side and this will result in the duty going up by over Rs 80 a tonne or about Rs 4 a bag at the current prices,” she added.

Caught between falling demand and rising input cost, the cement industry has been looking up to the Government for some relief. For instance, fuel cost has risen by about 30 per cent, power tariff by 12-15 per cent and freight cost by 10-12 per cent.

The industry had registered a demand growth of just 2.6 per cent in the December quarter against 7-8 per cent in the comparative quarter last year. Given the fact that the demand has grown by just 5.4 per cent in nine months ended December, the industry is expected register a growth of just seven per cent this fiscal against 10.8 per cent achieved last fiscal.

Mr Vindo Juneja, Managing Director, Binani Cement, said the Budget proposal on cement industry is inflationary and may add to construction cost. The industry has been demanding some relief as it has made huge investments in increasing the capacity, he added.

“Though we have to look into the fine print to gauge the impact on retail prices, I expect the prices to go up by at least Rs 10-12 a bag,” he said.

The industry expects the cut in import duty on gypsum will not be of much help as they source it domestically; while there will be a marginal relief from the reduction in petcoke import duty. Further, on the raw material cost there has been an unexpected levy of one per cent excise duty on fly ash, coal and lignite.

“Moreover, the levy on fly ash, coal and lignite has been made non-cenvatable. This indeed was very surprising as it reflects that the cement industry has been chosen to be burdened with additional duties and thereby making cement dearer,” said Ms Singhania. The value- added product like RMC (ready mix concrete) has also been burdened with excise duty of one per cent without any relief by way of Modvat credit on excise duty, she added.

Lukewarm response

Our Chennai Bureau reports: The cement industry has expressed a lukewarm response to the budget announcements regarding the rationalisation of excise duty on cement and reduction in basic customs duty on petcoke and gypsum. The proposals are not of major significance but could nudge up prices by a few rupees a bag.

Mr A.V. Dharmakrishnan, Executive Director – Finance, Madras Cements, said there is no real rationalisation in central excise duty with the government continuing to levy ‘ad valorem' and specific rates. Cement is the only commodity that is subjected to this kind of levy. There appears to be no understandable reason for such a structure.

The Government had earlier levied ‘ad valorem' rates on MRP but now this is levied on the sale price. But the levy of specific rate duty over and above the ‘ad valorem' negates any benefit.

Published on February 28, 2011

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