Search the Internet          Tips  Sites: Finance, Investment

Run up to the Budget: Cement sector

Key Inputs

Limestone, Coal, Power, Clay, Silica

• 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.

• 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

• 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.

• 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.

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

Tell us what you think of this analysis