Dear Mr. Finance Minister...

Updated: Jan 29 2003, 05:30am hrs

Cement is one of the highly taxed commodities in India, both at Central and state levels. It constitutes approximately 30 per cent of the selling price of the cement, excluding local transport and dealers margins.

I put forward my suggestions for the budget proposals 2003-04 which would not only boost the growth of cement industry but also create employment opportunities and accelerate economic development:

* Construction and infrastructure have the highest multiplier effect both in the form of revenue and employment. A thrust on housing construction and infrastructure would not only bring substantial facilities for the people but create revenue for the government and at the same time generate millions of jobs. Construction contributes as much as seven per cent of GDP and enjoys multiplier of about eight, considering all effects direct, indirect and induced. According to estimates, at present there are 31 million construction workers in the country and an estimated 10 per cent increase in construction investment would lead to 2.5 per cent increase of total employment of the country.

* The Honble Prime Minister has laid thrust on road connectivity through schemes like Golden Quadrilateral, East-West, North-South Corridors and rural India. I would like to bring to your kind attention that no serious thought is being given by the government departments for laying concrete roads under either of the schemes. Our systems do not have provisions of maintenance of roads and concrete roads even on initial cost would match bituminous roads in favourable soil conditions with life span of 30-40 years as compared to 2-3 years of bituminous roads. The government may kindly mandate for laying of concrete pavements, both for national highways and the rural roads.

By adoption of Canadian technology, we have constructed a road with High Volume Fly Ash (HVFA) with 50 per cent cement and 50 per cent fly ash. We have worked out the cost and we believe that it is hardly five per cent higher than the cost of bitumen road initially with no recurring cost of maintenance.

* Cement industry attracts specific rate of duty of Rs 350 per tonne. The government has been considering introduction of MRP/transaction value system for charging excise duty, which would result into annual revenue loss of Rs 900-1,000 crore to the government. Cement industrys contribution to exchequer over Rs 3,500 crore per annum without a single case of litigation and pilferage. Ad-valorem system of excise duty would create opportunities of malpractice, disputes, as the end price continue to vary from destination to destination on daily basis. The excise duty on ad-valorem basis can only be assessed provisionally. Further, incidence of CENVAT credit is negligible as major inputs like coal, limestone and power are non-excisable. Keeping in view the intricacies in valuation, transparency in the present system and non-existence of litigation, the Kelkar report has also recommended continuation of excise duty on specific rate for cement industry.

* Customs duty on non-coking coal was increased from 15 per cent to 25 per cent in May 2000, which adversely affected the cement industry. In spite of highly competitive international market, cement industry was able to export 5 million tonnes. International price of coal is no longer in the vicinity of $19-20 when the import duty was increased. Today these prices are around $29-30 per tonne and it is, therefore, submitted for your kind consideration to reduce the customs duty on non-coking coal to five per cent as is applicable on coking coal.

* Cement industry fully supports and welcomes efforts for introduction of value-added tax (VAT). However, introduction of VAT may be simultaneous in all states to avoid disparity. Another area, which needs governments urgent attention, is the commitment given by the various state governments to attract investments in the form of sales tax exemptions, which could be replaced if necessary, with remission to remain compatible with VAT regime. The states must honour the commitment given to the industry at the time of investment.

Yours Truly,

Chairman, Gujarat Ambuja Cement