Excise cut fails to stem increase in cement prices

Excise cut fails to stem increase in cement prices
The Financial Express, March 3, 2009, Page 3

Smita Joshi Saha, Mumbai

The demand-supply forces seem to have nullified the impact of the recent excise cut on cement announced by the government, as cement prices in the non-trade segment have increased from Monday by Rs 6-10 per bag, say cement dealers in the western region.

It is also to be noted that after a price hike of Rs 4-5 per 50 kg bag in the first week of February 2009, there was a second round of price hike of about Rs 3 per bag by cement manufacturers in the retail segment in the third week of February.

Cement dealers whom FE contacted have confirmed the price hike in both trade and non-trade segment. However, cement manufacturers do not seem to agree with this.

Binani Cement MD Vinod Juneja told FE, “We have so far not increased the prices again, but we are considering the price increase after taking into account the market feedback.” Similarly J Datta Gupta, chief commercial officer, ACC Ltd said, “We have not increased our bulk cement price anywhere in India as on date. We have passed on the excise relief of Rs 60 /MT to our bulk consumers in Mumbai where we have the majority of bulk sales. It is not possible to predict the future price movement of cement, as cement is a commodity and subjected to price changes based on the demand-supply mismatch,” he adds.

With the aim to give relief to the industry which is reeling under impact of the slowdown, the government on February 24 announced an excise duty cut on bulk cement from 10% to 8%, after which cement majors like ACC Ltd and Ambuja cement said there is a likely impact of Rs 2 to Rs 3 per bag.

If dealers are to be believed, cement prices have been increased twice in the month of February. “We have been told to increase prices by Rs 3 per bag in the last week by all cement manufacturers. Now they have increased the prices of non-trade segment. However, the shortage in supply still prevails due to non-availability of sufficient railway rakes,” said a Mumbai-based dealer on condition of anonymity.

Meanwhile, cement majors have reported excellent growth in the cement despatches for the month of February 2009 citing good demand from the infrastructure sector. Ambuja Cements’ despatches for February grew 11.26% to 1.64 million tonne from 1.48 million tonne in the corresponding period last year. ACC Ltd also reported a growth of 3.55% in its despatches for February to 1.75 million tonne from 1.69 million tonne in February 2008. Aditya Birla Group’s cement despatches in February 2009 were up by 10.08% at 2.91 million tonne over February 2008.