Specific duty goes, cement prices may soften

Cement prices are likely to come down by Rs 2-4 per 50 kg as a result of the government's decision to replace the specific duty of Rs 600 per tonne with an ad valorem duty of 12 per cent on bags with a retail price of Rs 190 or more.

However, as an incentive to companies selling 50-kg bags for Rs 190 or less, the concessional duty of Rs 350 per tonne will continue. Cement producers are still to decide the extent of the price cut. "Though the exact calculation remains to be worked out, whatever we save as a result of this move will be passed on to consumers," said D Sundararajan, executive director, Binani Cement. "In northern India, cement is selling for Rs 220-230 per 50 kg. Companies that were paying Rs 600 per tonne as excise duty will now have to pay Rs 528-552. This will help them save Rs 48-72 per tonne, or Rs 2.40-3.60 per bag. But we are still to decide on the price changes," said Shailendra Chouksey, director, JK Lakshmi Cements.

The Cement Manufacturers' Association, welcoming the move, called it a "pragmatic step" that will help bring down the prices.

If the industry passes on the benefit to customers, f they do, the decision to replace the dual duty regime with 12 per cent ad-valorem duty on cement bags priced above Rs 190 is expected to lower prices by 6-8 rupees a bag.