Cement to be dearer by Rs 8-9 per bag

Cement is set to be dearer across the country by Rs 8-9 per 50 kg bag from March 1, with the rise in excise duty, industry sources said.

"As a result of the proposed changes in excise rates, the price of cement will rise. The question is not when it will go up, but by how much," Cement Dealers' Association President Sanjay Ladiwala said.

In his Budget speech, the Finance Minister has proposed 10 per cent ad valorem plus Rs 160 per tonne as excise duty on retail sale prices of cement if they exceed Rs 190 per tonne.

Presently, 10 per cent of retail sale price is charged as excise duty. The current price of cement on an average is Rs 250 per bag of 50 kg.

Cement is a regionally traded commodity and the price of it varies from region to region depending upon the demand- supply dynamics of a particular area.

Industry sources said on the face of Budgetary proposals, cement makers would have to pay an additional Rs 8 per bag as excise duty and the 12.5 per cent applicable VAT makes it costlier by a total of Rs 9 per bag.

Hence, the rise in the price would be anything between Rs 8-9 a bag, they said, adding this would be passed on to the consumers with immediate effect.

"A change in rate structure will impact the sector adversely as it will result in increase of duty. However, at the same time, cement makers tend to benefit during the down-cycle when the prices soften. Hence,the impact is likely to be short-term," Nitin Gupta, Partner, Ernst and Young, said.

Meanwhile, lending ear to cement makers' plea, Mukherjee has also decided to bring down the import duty on petcoke and gypsum by half to 2.5 per cent.

"The basic customs duty on two critical raw materials of this industry viz. petcoke and gypsum is proposed to be reduced to 2.5 per cent," Mukherjee said in his Budget speech.

The cement industry has been asking to bring down import duty on gypsum and petcoke to nil from 5 per cent now to partly offset the rising manufacturing costs.

Cement makers import around 20-25 per cent of their annual gypsum requirement. Imports of petcoke, used for manufacturing higher grade of cement with the same raw material stand at around four million tonnes a year.

Petcoke has more calorific value compared to coal. Gupta said the reduction in import duty on gypsum and petcoke coal would augur well for the cement industry and partially neutralise the impact on rise in excise duty.