Cement prices firm despite cut in excise

Cement prices firm despite cut in excise
Published: 21 May 2007


Indian cement prices are likely to remain flat despite the recent reduction in excise duty by the government. So far, Gujarat has witnessed a marginal reduction of Rs 1 per bag, while the southern region hasn’t shown any sign of a cool-off, yet.

In fact, barring Karnataka, prices in the South have gone up by an average Rs 3-5 per bag since March, with Tamil Nadu seeing the highest increase at about Rs 10.

The South had witnessed the highest price increase during the January-March quarter this year, at more than 9.7% over the December level, compared with 2.4% in the North and 7.1% in the East. The West operated consistently at an utilisation level above 100%, which, in turn, has kept prices in the region elevated.

According to a report by Anand Rathi Securities, prices have came down in the North by Rs 2-3 owing to excise duty change, though Delhi remains unchanged. The East, where prices are relatively stable, is yet to see implementation of the revised excise duty structure.

In order to bring down domestic cement prices, the government had not only reduced the import duty to zero, but also waived the countervailing duty, which is levied in lieu of the domestic excise tax. Some shipments of cement had arrived from Pakistan, but in view of the huge demand-supply gap, domestic manufacturers refused to cut prices.

According to Care Research, a division of Credit Analysis and Research Ltd, cement prices will remain stable across the country next quarter.

Analysts believe demand will remain buoyant in the near term, though some price pressure could be witnessed in select states during the monsoon.

Experts expect flat-to-low demand during the monsoon. Current prices would hold until June-end and decline by Rs 5-8 thereafter, they say. Production in the fourth quarter last fiscal registered a slightly sluggish growth of 6.4% year-on-year (9.7% in Q3).