The Railway budget has brought some cheer for cement makers reeling under ever increasing road freight. Though the railway minister hasn’t tinkered with the rate classification for cement and clinker, cement industry will now get bulk discounts, long-term customer discounts and lean season discounts.
Some executives say that savings could be as high as 30% if the various discounts schemes are implemented in the spirit. The main beneficiaries of the scheme would be companies having plants in central, eastern and South India with railway sidings such as ACC, Grasim, Zuari Cement and Jaypee among others.
Newer plants in TN, Rajasthan and Himachal Pradesh without railway sidings will however, remain unaffected. Freight cost account for as much as 15% of the final selling price of cement. The share of railways in cement transport has been declining over the years and is currently around 35%.
Some companies such as ACC for example, however, transport up to 55% of their cement through rail. The industry executives are not rushing to quantify gains from the various rebates proposed in the budget in the absence of more details. "Though exact mathematics will depend on the details of the schemes, we expect significant savings on our freight bill.
We are now trying to ascertain the details of the announcement such as the definition of lean season and eligibility criteria for a bulk and long-term customers," says a marketing head for a cement major, who didn’t want to be identified. Others are not that optimistic.
"Though on the whole the budget looks positive for the sector, there might be devils in details. We are waiting for the railways to come out with a detailed guidelines on the rebates ," says ACC spokesperson.