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Core initiatives to push up cement demand

Rumi Dutta

The cement industry has received a fillip following Union finance minister Yashwant Sinha's budget announcement today. This is primarily because of the agricultural, infrastructural and road development initiatives which is expected to push up demand significantly.

The finance minister also announced a full excise relief for cement sold in the earthquake-hit Gujarat which will be valid up to July 31.

According to DD Rathi, president and CFO of Grasim Industries, "The budget is expected to have a positive impact on the economy as well as on the cement industry."

Anil Singhvi, executive director of Gujarat Ambuja, said, "The budget will have a positive impact on account of the emphasis on agriculture and road development programmes."

Though the customs duty on cement has been reduced from 35 per cent to 25 per cent and the 10 per cent surcharge has been discontinued, cement companies do not see any major adverse impact.

However, the Rs 350 per tonne countervailing duty still holds. This eventually keeps the customs duty on cement at 45 per cent compared to the pre-budget levels of 65 per cent. Sinha also did not touch the excise duty on cement which is Rs 350 per tonne, which has remained the same for the last two years.

Explaining why the lowering of customs duty will not have any major impact on the sector, Rathi said, "The retail landed cost will be around Rs 208 per 50 kg bag. This will be still higher than the Rs 185 a bag in Bombay and around Rs 160 in the rest of the country."

However, the increase in duty on high-speed diesel to 16 per cent will have some negative impact on Gujarat Ambuja and Larsen & Toubro. Both the companies have captive power DG sets which run on diesel.

Senior Larsen & Toubro officials said, "The change in import duty will have no significant impact on us and on the domestic prices."

According to analysts, the cut in import duty will have no significant impact on the cement industry considering the fact that the import largely depends on the infrastructural bottlenecks of the ports. It is also a factor of variable cost as well as the basic cost of input. This makes the prices in Southeast Asia no indicator of the an impact in the Indian cement industry.

The total excise duty on white cement stands at 32 per cent, 16 per cent excise in addition to the 16 per cent special charge.

Source: Business Standard

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