The Indian cement industry is in a wait and watch situation and have to yet decide on whether to pass on to the consumers the 4% excise duty cut announced by the government on Sunday. The excise duty for cement was 12% earlier.
Cement manufacturers like UltraTech, JK Cement, Shree Cement and Binani Cement whom FE spoke to, are yet to take a decision. No spokesperson from ACC Ltd was available for comment. It is understood that the industry is likely to make some announcement by the end of this week.
On the other hand, Indian Railways had increased the freight classification for cement, coal and coke, which means an increase of 8% in freight costs for cement companies. This will increase the price of cement between Re 1 and Rs 2.50 per bag. Experts believe taking into consideration all this, a price cut of about Rs 4-5 per bag is likely.
?Yes, we will pass on the benefit to the consumers but we still have to calculate it by taking into consideration the freight increase and excise cut,? said HM Bangur, CMD of Shree Cement Ltd. Vinod Juneja, MD of Binani Cement Ltd told FE, ?We will get a benefit of Rs 140 per tonne by the 4% excise duty cut. We don’t want to make any announcement immediately. There is pressure on raw material cost and in Rajasthan prices have already fallen by Rs 4-5 per bag. Hence, we don’t want to reduce it further. We will be taking a decision on this next week in our meeting.? JK Lakshmi Cement is also assessing the impact on its duty structure as it presently has considerable inventory at the dump points. This cement was dispatched after payment of excise duty on the basis of earlier structure.
Currently cement prices in Mumbai range about Rs 245-255 per 50 kg bag. In North it is around Rs 225-230 per bag whereas in the South it is about Rs 260 per 50 kg bag. Reacting to the government’s decision to increase freight rates on cement, coal and coke by an average of 8%, Assocham secretary general D S Rawat said, ?Increase in freight rates would have serious implications and will outdo the fiscal measures being taken by RBI and government to extend relief to India Inc, besides further pushing up inflation.??