Higher-than-expected increase in surcharge and cess by the Indian Railways would increase freight cost for cement companies, said two analysts tracking the sector. Indian railways raised its development surcharge on all goods traffic from Saturday from two to five per cent.
"In the Annual Railway Budget, the railways had indicated that they would raise the surcharge by seven per cent and cess by two per cent. However, they have notified today that the increase is actually 13 per cent in surcharge and two per cent in cess, so an effective hike of 15 per cent, as compared to nine per cent which was earlier intimated to the industry," said RBS. "This would increase the freight cost for cement by INR2.5/bag. Industry roughly moves 50 per cent of volumes by railways, hence this would need a 1 percent price hike to neutralise," added the bank