The government’s announcement of a cut in excise duty on bulk cement by 2% will have a marginal impact on the overall dynamics of the cement industry, as bulk cement contributes not more than 8-10% of the total cement off-take.
At the same time, the prices of bag cement (50 kg bag) that had been increased by Rs 4-5 per bag in parts of the country early this month, will remain unchanged, say industry players.
Vinod Juneja, managing director of Binani Cement said, “We are yet to decide on the prices to be passed on to the bulk consumers, whereas prices of bag cement for retail consumers will remain intact.” Bulk cement constitutes about 20% of the total cement off-take for Binani. The company had increased the prices of cement by Rs 4-5 per 50 kg bag in Maharashtra, citing an increase in demand.
After passing on the benefit of an excise cut in the second stimulus package, cement players reduced the prices of cement by Rs 4-6 per bag in December last year. Then, on the backdrop of good demand, players had increased the prices of the commodity in February 2009.
Cement dispatches from the past consecutive three months had also increased with 11% year-on-year in November 2008, 12% year-on-year growth in December 2008 and 8.26% year-on-year growth in January 2009.
Meanwhile, taking into consideration the rising demand in the current quarter, experts and industry watchers also don’t rule out the possibility of one more price hike in bag cement by March end this financial year.
ACC’s chief commercial officer, J DattaGupta, said, “Excise cut on bulk cement will be of mutual benefit to the company and the bulk customers. However, the cement industry’s long-standing request for providing abatement on excise duty on MRP is yet to be considered by the government.” ACC had increased the prices of cement in MP and UP by Rs 4-5 per bag early this month. It will pass on the excise cut benefit of Rs 3 per bag to bulk customers, which has a marginal contribution in its total cement off-takes. The sale of bulk cement for ACC in Mumbai is about 50,000 metric tonne (MT) per month and in the rest of India the sale is about 7,000 MT per month, compared to a total (bulk and bag) cement sale of 18-19 lakh MT per month pan India. However, according to DattaGupta, the move is expected to stimulate demand from the real estate, commercial and infrastructure segments.
Meanwhile, Ambuja Cement, in a statement, also said, “Bulk supplies vary from region to region and are in the range of 12% to 15% of Ambuja Cement’s total sales. The likely impact is expected to be in the range of Rs 2 to Rs 3 per bag.”
Firm ground
• Cement players passed on excise cut benefit in second stimulus package
• Reduction in prices of cement by Rs 4-6 per bag in December 2008
• Prices of bag cement (50 kg bag) was increased by Rs 4-5 per bag early this month