The cement industry has expressed a cautious response to the impact of the Budget on prices. The Centre has again tinkered with the numbers and continues with a complicated system for taxing cement, they say.
Mr A.V. Dharmakrishnan, Executive Director – Finance, Madras Cements Ltd, said there is bound to be an overall increase of about Rs 6-7 a bag of cement under the new rates. Excise has gone up by two percentage points and there is a specific rate. Though there is a 30 per cent abatement, the tax is now on sales price as against ad valorem previously. This will also pose some practical difficulties as the sales price changes with different markets.
The added concern is that the higher tax rate comes close on the recent hike in freight rates which would add about Rs 25 a bag, he said.
Mr H.M. Bangur, Managing Director, Shree Cement, said one positive feature is the 30 per cent abatement on the retail sale price, which is a long pending demand of the industry. But the net effect of the change in rates on cement price remains to be seen. The excise rate has been hiked to 12 per cent from the prevailing 10 per cent and the specific rate is at Rs 120 a tonne. Some clarity may be expected only after reading the fine print, he said.
The Finance Minister has done away with import duty on coal prices which is a reduction of about 5 per cent, he said.
Mr Puneet Dalmia, Managing Director, Dalmia Cement, said the Budget announcements add to the cost pressure for the industry. Excise duty and service tax have been hiked, freight rates have gone up by 20 per cent which is a major impact for the industry which depends on road and rail movement. Overall production and distribution costs will go up, he said.
On the demand side, the measures to encourage housing and infrastructure development are something to look forward to. But the ground level implementation and the benefit that translates to the industry remains to be seen, he said.
Ms Vinita Singhania, Managing Director, JK Lakshmi Cement, said the increase in excise duty specially coming after the substantial hike in the rail freight would result in considerable increase in the cost of delivered cement. This will have a cascading effect on the cost of construction.
On the positive side, Mr D.D. Rathi, Director, Grasim Industries and UltraTech Cement, said the Government has given in to the long standing demand of the industry by rationalising excise duty and levy it on the retail sale price less abatement of 30 per cent.
Mr Vinod Juneja, Managing Director, Binani Cement, said the logistic cost has already gone to 25 per cent of the retail price from 18 per cent. This comes on top of the steep hike in freight rates by the Railways, he said.
“Interest subvention for low cost housing may not have a major impact as consistent hike in lending rates have already put off buyers,” he added.
Mr Bangur said it is not clear whether the Government has allowed duty-free import of petcoke and other fuels for the industry.
Suggesting that the infrastructure bonds should be launched in May, Mr Juneja said normally these bonds are available during the year-end and looked at as tax-saving instruments. If these bonds are made available in May-June, infrastructure companies will be left with enough money and plan their investments comfortably, he added.