Cost issues for Indian producers

Cost issues for Indian producers
Published: 12 January 2005

Historically, the fragmented structure of the Indian cement industry coupled with a surplus position and rising costs had resulted in pressures on margins of the cement majors. However, increasing consolidation and relatively better demand-supply position have resulted in firm prices during the last several months. However, cement is a heavily taxed commodity and the tax incidence is almost 30 per cent of the sales realisation. 

 Rise in external cost elements, primarily power and freight costs continues to remain an issue. The cement industry’s performance is linked to growth in end-user industries like roads, housing and other infrastructure projects.Today, almost 60 per cent of the ex-factory gate price comprises taxes. There is growing shortage of fuel (coal) and customs duty on petroleum coke is high at 20 per cent. There is a need to reduce taxes and duties to be competitive. According to spokesmen excise duty on cement should be cut from Rs 400 a tonne to Rs 350 a tonne - Cut customs duty on petcoke from 20 per cent to 10 per cent.