Cement manufacturers, who are already reeling under the pressure of low demand for the commodity, have raised concerns over the indefinite strike by the transporters from Monday. Transporters, who are demanding removal of service tax, reduction in diesel price by Rs 10 per litre and 35% cut in tyre price, went on strike just two days after the government announced the stimulus package for the industry. However, cement manufacturers said the strike will impact the supplies only if it continues for more than 4-5 days.
HM Bangur, CMD of Shree Cement told FE, "We are hopeful that the transport services will resume in a day or two. As it has started today, it will be premature to comment on the long term impact. However, we have shifted our supplies more through railways from today. The strike will be a problem for those who don’t have their own railway transport facility."
The cement industry transports approximately about 60% of the commodity by road. Currently, the freight charges are about Rs 1.25 per ton per km with an average of about 450-500 km for a company normally. The government on December 5, last month had reduced diesel prices by Rs 2 per litre, despite which there was no sign of freight cut by the transporters.
"Binani Cement’s 50% of supplies are via road and if this strike continues, the supplies will be impacted. The government should immediately start negotiations with transporters and this time, they should come out with long term solution so that the transport strike doesn’t occur again in the short term," said Vinod Juneja, MD of Binani Cement Ltd.
Freight cost accounts for about 18-20% of the operating costs for cement companies. According to experts diesel prices have increased 9-10% YoY in FY09, which has led to an increase of Rs 1.5 - 2 per bag in FY09.