The 260 million-tonne cement industry, which is already impacted by falling prices, is now concerned about fuel prices going up next week, as it will make transportation costly.
Finance minister Pranab Mukherjee said he would meet cabinet ministers on Thursday to decide the date for the next meeting to discuss the issue of fuel deregulation which was deferred on Monday.
Diesel prices are likely to be hiked by Rs 1.5-2.5 per litre and petrol prices by Rs 2-3 per litre.
Industry players say a rise in fuel prices will impact freight expenses of cement manufacturers, resulting in higher cost of production.
Reacting to increased supplies from new plants and other factors, cement prices have already declined by Rs 5 to Rs 25 per 50 kg bag across the country in the past one month.
The cement industry transports approximately 60% of its products by road and freight costs account for about 18-20% of the operating costs of these companies. With cement prices falling throughout the country, rising fuel prices will have a negative impact, feel industry players.
Moreover, the industry is unsure whether it could pass on the cost push to customers in the current environment of sluggish demand. Industry sources say cement manufacturers will have to absorb the current cost push for another two-three months.
Expressing concern on the hike in fuel prices Vinod Juneja, MD of Binani Cement and member of Ficci?s governing council, said, ?The industry will suffer logistically. But we will try to pass on the hike as much as possible.?
HM Bangur, CMD of Shree Cement said, ?Hike in fuel prices has to be passed on to customers but it may not be done immediately. We will take a call only after deliberating on the matter with transporters and finding out whether they will pass any hike in freight costs to us.?
Industry sources said that , during monsoons, the transportation sector also faces demand slowdown. Hence, they also may not pass on the hike and absorb the cost push to keep the trucks running. Analysts expect price declines to be sharper this monsoon, as incremental demand is likely to fall short of incremental supplies by a wider margin.
Cement majors like UltraTech and India Cement have witnessed their realisations take a beating in the fourth quarter due to fall in prices in the southern region.
A Dalmia Cement spokesperson said, ?It needs to be seen as to how much is the hike, and accordingly, a decision will be taken. In certain markets, it could be passed on and in certain others it could not be.
