The cement sector seems to have been badly hit by the recent hike in fuel prices . With the increase in fuel prices, transportation costs too, have soared. The cement industry was expecting a hike of 5-8% per tonne, but it has increased to 15-20% per tonne.
Talking to FE , HM Bangur, VP, CMA and CMD of Shree Cement said, ?Transporters have increased the transportation cost by Rs 1 per bag for every 100 km. The hike will impact our margins.?
Freight charges before the fuel price hike were about Rs 1.40 per tonne per km with an average of about 450?500 km for a company normally. Freight cost contributes to about 20%-25% to the total cost of production, of which road contributes to about 50-60%, depending from company to company.
Last week, the government decided to raise petrol prices by Rs 5 a litre and diesel by Rs 3 a litre, which acted as an added woe for the cement industry.
?Today, we are absorbing all the cost increase. Whether to pass it to the consumers or not will depend on the market and demand-supply scenario,? said AK Sarogi, CFO, JK Cement.
Vinod Juneja, deputy managing director of Binani Cement said, ?We are still trying to calculate how much can cost increase to absorb and how much to can pass on.?