The Glass industry consists of four main segments-Container glasses, Specialty glass, Flat glass and Fiberglass. Container glass, which is the largest segment in the glass sector, comprises of glass packaging for consumer goods and pharmaceuticals.

Next largest segment is the specialty glass, which is mainly used, in technical applications such as electronics and engineering. Flat glass segment comprises of float glass and rolled glass, which are mostly used in architectural and automotive applications.

The price of Soda ash is a major cost in the raw material segment. Higher cost of input particularly Soda ash, which constitutes about 30 per cent of cost of production of glass products, is one of the major factors contributing to the higher cost of glass and glassware. Major manufactures of Soda ash in India are Tata Chemicals, Gujarat Heavy Chemicals, DCW and NIRMA.

They continue to rule the Indian market by fixing the prices of soda ash.

Budget Impact

The increase in excise duty will have minimal impact on supplies to other user industries, as it is cenvatable.  Where the industry supplies to the replacement sector without providing the break up of the product and the excise duty, impact will be felt.  So, the players have to hike prices in respect of the supplies to replacement market.

Outlook

The hike in excise duties will impact the margins in the replacement market.  Alternatively players have to hike the prices to factor in the hike in excise duty, in respect of supplies to replacement market.  However, the hike in excise duties and service tax will have no significant impact in respect of supplies to OEMs.  However, players with greater share of revenues from exports will marginally benefit, as we expect upward revision in duty draw back rates some time in June 2012, factoring in the higher incidence of excise duties and service taxes.