Cement producers in defiant mood, up prices

The day after...protest and relief

The cement industry and finance ministry appear headed for a face-off.

Contrary to Finance Minister P Chidambaram's anticipation that cement companies will take a price cut to benefit from the dual duty structure, the companies have increased prices by an average 6 per cent with immediate effect and plan to approach the finance minister for a rollback of the duty structure proposed in the Budget.

"We have raised prices by Rs 10-12 per 50 kg bag in response to the higher excise duty. The taxes on cement are estimated to be around Rs 60 per 50 kg bag. Instead of reducing the excise duty, it has been increased by 50 per cent," said H M Bangur, vice-president of the Cement Manufacturers' Association of India (CMAI) and chairman and managing director of Shree Cements.

Meanwhile, P Chidambaram today asked India Inc, particularly cement companies, to hold the price line in order to help the government fight inflation.

"I am happy that most industries have not pushed up prices. But in cement, prices have gone beyond all reasonable limits," he told industry leaders a day after presenting the annual Budget.

The Budget has proposed to reduce the excise duty on cement from Rs 400 per tonne to Rs 350 per tonne if a particular brand of cement is sold at a price not exceeding Rs 190 per 50 kg bag.

However, cement selling at prices above this mark will attract a duty of Rs 600 per tonne, about 71 per cent higher than for those selling at or below Rs 190.

This was broadly intended to be an inflation-control measure.Cement has a weightage of 1.73 per cent in the wholesale price index (WPI) and has been witnessing inflation levels of 10-15 per cent in recent times. Prices of cement in the domestic market have moved up by 30-40 per cent over the past one year to Rs 210 (50 kg bag) on an average. The latest price hike is likely to impact inflation in the coming weeks.

In January, the finance minister had alleged price manipulation by cement manufacturers through hoarding. However, the industry denied such allegations.

According to the data with CMAI, 112.82 million tonnes of cement were produced and 112.25 million tonnes dispatched between April and December 2006.

The import duty on cement was cut from 12.5 per cent to nil to facilitate cheaper imports. However, no imports took place since domestic prices were lower. Even with the latest price hike, no import is feasible and domestic prices are still competitive, said Bangur.

Meanwhile, cement stocks, which fell about 6 per cent yesterday, continued to fall. At the Bombay Stock Exchange, share prices of ACC fell by 2.6 per cent to Rs 876.55 while that of Ultratech Cements, the country's largest cement company, fell 2.3 per cent to Rs 870.15.