February 25, 2000

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Sector report: Cement

Inputs

Limestone, power, clay, silica and gypsum

Key Players
Associated Cement Companies, Grasim, Gujarat Ambuja Cement, India Cements, Larsen & Toubro, Madras Cements, JK Corporation, Jaypee Group, Lafarge, Mehta Group, DLF, Century Textiles & Industries.

Tax structure

Customs Duty
Item	1998-99	1999-2000
Cement	50.80%	45.6 %*
* exclusive of CVD of Rs.350/tonne
Excise Duty (per tonne)
Item	1998-99	1999-2000
Cement – Large Plants	Rs 350	Rs 350
Cement – Mini Plants	Rs 200	Rs 200

Background

• Cement is a highly taxed industry and is expected to contribute 4.84 per cent of budgeted excise revenue in 1999-00.
• Cement production during in April to December 1999 has shown 17.2 per cent increase compared with the corresponding period in previous year.
• Coal, freight and power constitute more than 45 per cent of the cost of manufacturing cement. Cost of coal, freight and power has been increasing at a compound annual growth rate between 8 to 13 per cent over the last decade, while cement prices have been growing comparatively slowly at a CAGR of 7 per cent.
• There is a significant scope for cement consumption to grow in India. This is borne out by the fact that the per capita consumption of cement in India is 64 kg against 240 kg in China and 110 kg in Indonesia.

Expectations from the Budget

• The Cement Manufacturers Association has called for the continuation of excise duty being levied on a specific basis.
• The CMA has also asked the government to impose an additional 10 customs duty so as to protect the domestic industry from dumping from South-East Asian countries.
• The Confederation of Indian Industry has suggested a reduction in excise duty on Portland cement from Rs 350/MT to Rs 250/MT and on mini-cement and clinker from Rs 200/MT to Rs. 100/MT.
• The marginal hike in railway freight rates announced in the Railway Budget 2000-01 will have an adverse impact on the cement industry.

ALSO SEE:

What will Yashwant Sinha do?

How will personal taxes change?

Fiscal report card

SECTOR ANALYSIS:

Automobiles | Cigarettes | Fertilisers | Hotels | Housing
Mutual funds | Paints | Paper | Petrochemicals | Pharmaceuticals
Power | Software | Steel | Tea and coffee

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