Budget 2019

Steel, cement to cost more

Our Bureau Mumbai | Updated on January 27, 2018 Published on February 29, 2016


Profits will be hit by increase in taxes

Doubling of the Clean Environment Cess on coking coal to ₹400 a tonne is expected to hit steel and cement companies hard and weigh heavily on consumers, particularly when the Government is focusing on sprucing up infrastructure and pushing investors to ‘Make in India’.

TV Narendran, Managing Director, Tata Steel India, said the domestic steel industry plays an important role in ‘Make in India’ and the ‘Smart Cities’ initiative as it is a key material supplier to allied industries. However, the industry has been bogged down by a deluge of imports and predatory pricing over the last 18 months. While recent interventions by the Government have come as a breather, long-term measures to create a level playing field are required to ring-fence the domestic steel industry from global overcapacity and dumping, he said.

Vishal Agarwal, Vice-Chairman, Visa Steel, said the Budget is extremely disappointing as the environment cess constitutes about 7.5 per cent of the coal price and, along with the import duty of 2.5 per cent, the effective tax on coking coal imports will be 10 per cent.

Contrary to Finance Minister’s vision to incentivise domestic manufacturing, he said the export duty on iron ore and chrome ore concentrates have been done away with from 30 per cent levied earlier. This will increase raw material costs for steel and ferro alloy companies, he added.

Shailendra Chouksey, President, Cement Manufacturers’ Association, and whole-time director, JK Lakshmi Cement, said cement prices would rise by ₹3-4 a bag just on account of the clean environment cess.

“The total tax incidence on cement is over 60 per cent of the ex-factory realisation. The Krishi Kalyan Cess at 0.5 per cent on all taxable services from June 1 will push up production costs further,” he added.

Ready-mix woes

Ready-mix concrete (RMC) players believed that their long-pending demand of exemption of excise duty on RMC plants has finally been addressed but it is applicable only todedicated RMC plants on site, the percentage of which is almost negligible, said Chouksey.

Ajay Kapur, Managing Director, Ambuja Cements, said while profitability of the cement industry would be impacted by the increase in cess, the excise on HDPE (high-density polyethylene) packaging bags (for 12.5 per cent to 15 per cent) and decrease in sale commission (from 10 per cent to 5 per cent) would add to the industry’s woes.

Published on February 29, 2016
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