India cement industry: no significant price hike soon

India cement industry: no significant price hike soon
Published: 18 December 2007

Under attack from various quarters for price increases, the cement industry today hit back at critics vowing that the demand-supply situation has been restored to a level of parity and that there would be no significant price hikes in the near future. The industry also targeted the Government and allied sectors like the Railways and real estate for lack of cooperation. "Earlier this year the industry could not keep pace with demand, leading to price hikes. However, the situation has changed. We are investing Rs 50,000 crore over three years to set up additional capacity of 110 million tones (mt), taking the overall capacity to 270Mt," said Shree Cement MD H M Bangur. "We have been billed as a cartel given to unjustified price hikes, which is a misconception. 
 
 Between April-November this year, prices have gone up by less than 3 per cent even as we withstood higher taxes and fuel costs." The sector was punished by the finance minister in this year’s budget when an additional excise duty of Rs 200 per tonne was levied on cement costing more than Rs 190 per bag. But, the industry believes it was economics at work and there is little merit that they have been unscrupulous. Further, the industry is made to pay for fly ash even as companies the world over are paid for using such pollutants. "Under the garb of administrative charges we are paying between Rs 300-550 per tonne for fly ash. We are asking that we be given fly ash free as per Government directives," Bangur said.

The industry consumes 20 mt of fly ash every year and ends up paying Rs 800 crore towards surcharges. "Imports from neighbouring countries like Pakistan were encouraged while we endured high taxes. We didn’t complain and managed to maintain profitability largely due to high volumes," said J K Cement Group executive president R G Bagla. Currently, around 40,000t of cement is imported every month (0.5Mta) from Pakistan, even as India exports 7 mtpa. "The Railways and real estate took advantage of our negative image and jacked up their prices," he added. The country consumes 165Mt of cement and has an installed capacity of 173 mt. Demand has been growing at a CAGR of 10 per cent over the last ten years. The breakdown Industry claims to have filled the demand-supply gap Aims to take capacity up to 270Mt by 2011 Industry bears surcharges worth Rs 800 cr on fly ash while worldwide firms are paid for using fly ash Royalties and taxes constitute 60% of ex-factory price of cement