Increase in excise duty likely to be passed on to customers

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: The cement industry, which is expected to grow at a robust rate during FY09, driven by rising demand from the real estate and infrastructure sectors, is disappointed with no benefits being announced for the sector in the Union Budget 2008.

Finance minister P Chidambaram in his budget speech made two announcements related to the cement sector, i.e., bulk cement will now attract excise duty of Rs 400 per metric tonne or 14% ad valorem, whichever is higher, and cement clinkers will be liable to excise duty of Rs 450 per metric tonne, increased from Rs 350 per metric tonne at present. This is likely to have neutral impact on the cement industry, say industry players. The duty hike in bulk cement will impact only a very small segment of cement manufacturers and the impact will also be marginal as the duty hike will be passed on to the customers.

HM Bangur, VP, CMA and CMD, Shree Cement, said, “The increase in duties will not have much impact. However, we are disappointed as we were expecting excise rebates.”

“It was essential to bring down excise duty on cement to 6% to give a boost to infrastructure development, as we are facing stiff competition from South East Asia, China, and West Asia. The government had withdrawn customs duty and countervailing duty in the past which created a non-level playing field, resulting in increase of cement imports. The FM should have re-visited the policy on zero import duty on cement,” said Vinod Juneja, deputy MD, Binani Cements.