CMA may consider cancelling cement price freeze

CMA may consider cancelling cement price freeze
Published: 05 April 2007

The cement price tussle between the government and manufacturers continues as the government has now cut the countervailing and additional customs duties.

In response to the announcement, it is being heard from sources that Cement Manufacturers Association may consider cancelling the cement price freeze pact with the government. However, CNBC-TV18 has not yet received any final confirmation from the government and CMA.

After coaxing the cement industry to freeze prices, the Finance Ministry has removed 16% countervailing duty and 4% Special Additional Customs duty on imported cement. This has been done in order to make imported cement more viable than domestic cement.

However, JK Cement states that the industry has not yet submitted any proposal for a re-look at prices. Newspaper reports suggest that the government may think of banning cement exports next.

CLSA has downgraded ACC and Gujarat Ambuja from underperform to sell, India Cement from outperform to underperform. It also feels that the cement price cut seems unlikely to stay as the industry may not want cement imports to get established.

Meanwhile, the Pakistani PM Pervez Musharraf has expressed an interest in supplying cement to India.

However, Sanjay Ladiwala of Cement Stockists and Dealers Association mentions that he has not heard of any move from CMA as of now. He adds that logistical hurdles would restrict imports.

He says, "Imports are not going to be surging in as its envisaged or people thing it could be mainly because of logistical obstacles in most of the port areas I don’t think we are going to see such a fantastic flow of imports that is going to breach the gap between demand and supply. Firstly with that provision in mind, it’s after all the customer who is going to really go in for imports. Now the customer has to be motivated sufficiently to go ahead and take on the hassle of importing cement, albeit it maybe a few rupees cheaper, yes would land at about Rs 20-25 cheaper."

According to him, cement prices may stay subdued in areas near ports. He says that clients may not want the hassles of imports. Furthermore, Ladiwala says that monetary incentive is not enough motivation for imports.

According to Ladiwala, "Unless he has got adequate motivation the customer is not going to import and that would also be an obstacle in the surge of imports coming into the country. Once they do the prices would stay subdued in these port areas which according to my estimates would be either 3-4 ports in India itself and not more than that."

Also, earlier prediction of excess supply in 2010 may not happen, he adds.