The Union government’s threat to go ahead with the proposed ban on cement exports from India will not have the desired impact, say industry players and analysts.
Having failed to control prices, first by abolishing import duty on cement and then by increasing excise duty on cement bags priced above Rs 190, the government has now threatened a ban on cement exports. Banning exports is not a feasible solution. "Temporarily, it might create regional imbalances in the demand - supply situation, but it is unlikely to have any significant impact on the phenomenal demand," said a senior official with a cement company. Currently, cement exports account for a mere 4% of the total production. Players are confident that the domestic demand can easily absorb that quantity if pumped into the market. Cement companies exported 6.88Mt in the first nine months of 2006-07 compared with 9.19Mt in the previous financial year.
Cement exports account for a mere 4% of the total production India’s total production of cement is estimated at 160Mt this year Gujarat accounts for 80% of the total exports. Companies like Gujarat Ambuja, UltraTech, Sanghi and some others have plants in Kutch and Saurashtra specifically to target the Gulf market as prices in the Gulf are very high. If cement exports are banned, this could bring down prices temporarily. However, the demand growth in the western and northern region is much higher than the industry average of 10%. "With a 13-14% demand growth in these markets, we are really not worried about a possible glut or crash in prices," a cement manufacturer said. "But the damage to India’s image as an exporter will be substantial as we will be unable to keep our commitments," he added. Analysts also argue that it is not going to be easy for the government to implement the ban because countries like Sri Lanka, Nepal and Bhutan account for a chunk of the export kitty and India has trade agreements with these countries.