Excise hike on cement will drive up cost for consumer'

Chennai: Cement stocks took a beating on Budget day following the hike in excise announced by the Finance Minister, Mr P. Chidambaram, to control cement prices.

Stocks of leading cement manufacturers closed significantly lower reflecting the sentiments in the industry.

Cement manufacturers and those from the construction sector felt that the decision to hike the excise on cement sold at more than Rs 190 a bag would only drive up the cost for end consumer.

Mr Chidambaram hiked excise on cement sold at more than Rs 190 a bag to Rs 600 a tonne, a hike of Rs 200. As a sop to those selling cement at Rs 190 or lower, he reduced the excise to Rs 350 from the prevailing Rs 400.





The MRP of Rs 190, the Finance Minister said, was the price at this time last year and in itself was remunerative to the manufacturers.

Reacting to the announcement, Mr N. Srinivasan, Vice-Chairman and Managing Director, The India Cements Ltd, and a past president of the Cement Manufacturers Association, said that manufacturers would have no option but to pass on the increase. Cement prices were at the current levels across the country only because of market conditions, when demand was far exceeding supply, and not because of any other reason. Indian cement prices were globally competitive. 'I don't see any reason why the cement industry has to be singled out,' he said.

Mr A.V. Dharmakrishnan, Executive Director (Finance), Madras Cements Ltd, said that under the prevailing market conditions the hike in excise would only be passed on to the consumers. Cement companies have a wide market area, Madras Cements, for instance, sells cement in Andhra Pradesh and Assam.

Even if it sells at Rs 180 a bag in the South, prices would have to be higher to reach the markets further away. Manufacturers would face a hike in excise even if one bag of cement were sold at higher than Rs 190.

Mr Dharmakrishnan felt that the market would absorb the hike in price that the higher excise would entail.

Mr R.V. Shekar, Managing Director, Lancor Holdings Ltd, a leading developer in the South, felt that the hike in excise would only drive up the cement cost. Market opportunities and costs will drive prices and the Government's decision only adds to the cost for the end consumers.