Tax eats 30% sales

Updated: Jan 12 2005, 05:47am hrs
fe-ICRA Snapshot

India is the second largest cement producer in the world, accounting for approximately 6% of the global production. The total installed capacity is about 150 million tonne and the industry operates at approximately 80% of capacity.

The industry has witnessed good performance in the first nine months of the current fiscal and has reported production and despatches growth of approximately 8% on a year-on-year basis.

With consolidation, the top five players today control approximately 50% of the capacity. Historically, the fragmented structure of the industry coupled with a surplus position and rising costs had resulted in pressures on margins of the cement majors.

However, increasing consolidation and relatively better demand-supply position have resulted in firm prices during the last several months. However, cement is a heavily taxed commodity and the tax incidence is almost 30% of the sales realisation. Rise in external cost elements, primarily power and freight costs continues to remain an issue.

The cement industrys performance is linked to growth in end-user industries like roads, housing and other infrastructure projects.Tax Structure

fe Perspective

Budget must give a clear thrust to core sector

Availability of coal and rail wagons for plants away from shore must be ensured

CEO Speak
Today, almost 60% of the ex-factory gate price comprises taxes. There is growing shortage of fuel (coal) and customs duty on petroleum coke is high at 20%. There is a need to reduce taxes and duties to be competitive. The Budget must also take measures for demand generation.
AK JAIN, ED Marketing, ACC
CII suggestions

Excise duty on cement should be cut from Rs 400 a tonne to Rs 350 a tonne

Cut customs duty on petcoke from 20% to 10%

Ficci Wishlist

Lower excise duty and VAT for blended cement

Engage states to remove additional levies like turnover tax and entry tax