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Run-up to the Budget: Cement Industry

State of the industry (2000-01)

• Cement demand is expected to increase by 3 per cent as compared with that in 1999-2000. The increase in demand is expected to be lower than expected due to a higher demand base in 1999-2000, drought in major states in 2000, and lower state government spendings after the elections.
• On an average, prices are expected to be higher across all regions as compared with those in 1999-2000. In 2000-01, prices are expected to be higher by up to Rs 25 per bag in the south, by up to Rs 15 per bag in the east, by up to Rs 8 per bag in the west, and by up to Rs 5 per bag in the north, as compared with those in 1999-2000. Prices are expected to be higher, largely due to producer efforts to increase realisations.
• Cement costs are expected to increase by Rs 5-6 per bag, due to an increase in the costs of power, packaging, coal and freight.
• Exports are expected to be higher by about 50 per cent over those in 1999-2000, largely due to lower offtake in the domestic market.
• Profitability of pure cement companies is expected to be higher in the second half of 2000-01, as compared with that in the first half of 2000-01, largely due to higher realisations.

• Continuation of the specific rate of excise duty on cement: The Cement Manufacturers Association (CMA) has proposed to the Government to continue the existing specific rate of excise duty levied on cement.
• A reduction in the royalty on limestone: CMA has asked the Government to roll back the increase in the royalty on limestone. The royalty rate for limestone was increased by 25 per cent to Rs 40 per tonne during the October-December 2000 period.
• A reduction in the customs duty on imported non-coking coal: CMA has proposed a reduction in the customs duty on non-coking, from 28.6 per cent to 16.5 per cent (which was prevailing earlier). CMA has also asked that coal imports be allowed up to 100 per cent of the value of cement exported, as compared with the existing norm of 20 per cent.
• Encouraging the usage of cement in highways construction and other infrastructure: CMA has asked the Government to use cement concrete in the construction of national highways of over two lanes.
• Increased focus on the housing sector: CMA has proposed to repeal the Urban Land Ceiling (Regulation) Act in the remaining states and to ease other land use restrictions (for agro and non-agro land), so that more land is available for construction. CMA has also asked to accord urban infrastructure an industry status.
• An increase the abatement on MRP for white cement: CAM has proposed that the abatement on MRP for white cement be increased from 40 per cent to 60 per cent.

	Customs duty	Excise duty
	(per cent)	Rate	(Rs/tonne)
Feb 1999	40.0	Specific	350
Feb 2000	44.0	Specific	350

Notes:

1. Excise duty on cement produced by mini cement units is Rs 200/tonne.
2. Excise duty on white cementis 24 per cent and is on MRP with an abatement of 40 per cent.
3. Excise duty on Ready Mix Concrete reduced from 8 per cent to nil duty in 1998-99.
4. For 2000-01, customs duty includes the SACD of 4 per cent, effective since 1999-2000. In 1999-2000, the SACD was applicable only for non-traders, and hence, has not been included in the customs duty.

Cement: Domestic prices

(Rs per bag)	Apr-Jan		Change
	1999-2000	2000-01	(per cent)
Western region
Ahmedabad	129	135	5.3
Pune	136	137	0.3
Mumbai	144	143	-0.7
Northern region
Delhi	135	131	-2.9
Eastern region
Calcutta	145	161	11.6
Southern region
Hyderabad	112	139	24.0
Bangalore	149	159	6.8
Chennai	165	172	3.8

Notes:
Prices are averages for the respective periods

Source: CRIS INFAC

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

Rediff-CRISIL Budget Impact Analysis

Budget 2001

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