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Run up to the Budget: Cement sector
Key Inputs
Limestone, Coal, Power,
Clay, Silica
Tax Structure
Custom Duty
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Item
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1999-00
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2000-01
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Cement
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45.6%
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44.04%
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* excluding CVD of 350/ton
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Excise Duty Rs/Ton
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Item
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1999-00
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2000-01
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Cement - Large Plants
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350
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350
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Cement - Mini plants
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200
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200
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Background
- Cement is among the highly
taxed commodities with an average tax burden of Rs 815 per ton. Total incidence
of taxes and freight works out to around Rs 1,315 per ton.
- Despite the housing initiatives
taken last year, demand for cement has not seen any major signs of recovery
as reflected in the modest 3-4% growth this fiscal year as against 15% growth
in the previous year.
- Cement industry displayed
a marked slowdown during the first nine months of the current fiscal year
with cumulative production growing by 2.6% to 69.9 mn tons. Cement dispatches
in this period grew by 2.5% to 69.4 mn tons.
- However, there is an
ample scope for growth as the present per capita consumption of cement of
97 kg is very low compared to the world average of 263 kg.
- Reconstruction of the
earthquake-hit areas of Gujarat would require an estimated 2 mn tons of cement,
thus spurring the demand for cement.
Previous
Budget (FY 2000-01) announcements
- Budgetary allocation
of Rs15.01 billion for construction of houses for people below poverty line
- Enhancement of tax deduction
on interest paid for housing loan repayments from
Rs 75,000 to Rs 100,000
- Basic customs duty on
cement brought down to 35% from 40%
- Hike in railway freight
by 2% on cement
Pre-budget
industry wish-list
- Cement manufacturers
have demanded for a gradual reduction in excise duties to half of the current
rates over next five years. Associated Chamber of Commerce and Industry (ASSOCHAM)
has called for an excise duty reduction from Rs 350 per ton to Rs 250 per
ton.
- Confederation of Indian
Industry (CII) has demanded that abatement on Maximum Retail Price (MRP) for
white cement should be increased from 40% to 60%.
- CII has also demanded
rollback of custom duty on no-coking coal from 25% to 15%.
- Speedy implementation
of the lined-up infrastructure projects, including mass housing and road projects,
which have the potential to push up demand for cement.
Expectations
from the budget
- Given the current fiscal
position, the Government is unlikely to reduce the rates of excise duty on
cement. However, due to the prevailing high domestic prices a reduction in
customs duty (which at 44.04% is among the highest in the world) cannot be
ruled out.
Key Players
Associated
Cement Companies, Larsen & Tubro, Gujrat Ambuja Cement, Grasim, India Cement,
Madras Cement, JK Corp, Jaiprakash Industries, Lafarge, Mehta Group, DLF, Century
Textile Industries etc.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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