Export sops: marginal relief for cement companies

Export sops: marginal relief for cement companies
Published: 19 November 2008

The export incentives offered by the Indian Government will have little impact on the prospects of the beleaguered cement companies as the benefits are restricted to specific countries that are hardly tapped.
Cement exporters are entitled for tax refunds through the Duty Entitlement Passbook Scheme (DEPB). The sector has been included in the Focus Market Scheme of the Government. The Focus Market subsidy will be in the form of 2.5 per cent duty credits, which can be used for customs payments.

However, the export sops are limited to shipments to Latin America, Africa and Eastern Europe.
Mr Vinod Juneja, managing director, Binani Cement, said: “We have been getting enquiries from the European markets, but the shipping cost has to come down further to enable us to consider the option.”
Freight cost accounts for about 20 per cent of export expenditure. Freight rates through the sea route have fallen recently due to the drop in crude oil prices. The demand for vessels has also slowed down on the back of the global economic crisis, said an analyst.

Cement exports are largely confined to West Asia, Sri Lanka and Nepal, while a small quantity is also shipped to the African countries. Despite the demand in the real estate sector softening across the world, West Asian markets are still thriving.

Cement and clinker exports have jumped 43 per cent to 1.57Mt in the second quarter ended September 30, against 1.1Mt registered in the same period last year.

Exports in the first quarter of fiscal 2008-09 were lower at 0.3Mt. The sharp rise in cement prices forced the Government to ban exports for 45 days between April and May. Cement companies have been focusing on the export markets after the domestic demand tapered off. The real estate sector, which consumes about 60 per cent of the cement produced, has been reeling under the financial crisis.

Though the weak rupee has enhanced export realisation, it has become difficult to snatch orders from competing countries, particularly after the recent ban, said a cement company official.