Run-up to the Budget: Cement sector
Background
Cement production grew by an impressive 7% during Apr-Dec 01 as compared to 2.5% growth recorded in the corresponding period of the previous year. Consumption during Apr-Dec 01 grew by an equally impressive rate of 6.4% as compared with 1.4% during the year-ago period.
Long term prospects of the industry are favourable as present per capita consumption of cement at 99 kg is very low compared to the world average of 263 kg.
With big-ticket infrastructure projects including the Golden Quadrilateral project and the East-West, North-South corridors-coming up, the industry is looking forward to a leap in cement offtake over the next 3-4 years.
The industry is witnessing rapid consolidation with small companies either selling out or merging with larger competitors.
Production Statistics
|
(Mn tonnes) |
Apr-Dec 01 |
Apr-Dec 00 |
Change |
|
Production |
74.4 |
69.5 |
7.0% |
|
Consumption |
71.4 |
67.1 |
6.4% |
Source: Cement Manufacturers Association
Key Inputs
Limestone, Coal, Power, Clay, Silica
Tax Structure
|
Custom Duty
(Basic) |
|
Product |
2000-01 |
2001-02 |
|
Cement |
35% |
25% |
|
Non-coking
Coal |
25% |
25% |
Duty Structure
|
Excise Duty
Rs/Tonne |
|
Product |
2000-01 |
2001-02 |
|
Cement – Large
Plants |
350 |
350 |
|
Cement – Mini
plants |
200 |
200 |
|
White
Cement** |
24% |
32%** |
** Excise duty on white cement of 32% is on
MRP with an abatement of 40%
Major announcements made in previous year's budget
- Customs duty on cement and clinker reduced from 35% to 25%.
- White cement and other special cements will attract SED of 16% and a total duty of 32% as compared to 24% (16% basic + 8% SED)
Industry's demands from Union Budget 2002-03
The Cement Manufacturers Association has raised the following demands:
- Existing specific rate of excise duty levied on cement should continue.
- Basic customs duty on cement should be increased from 25% to 35%.
- Increase in royalty on limestone from Rs 32 per tonne to Rs 40 per tonne, made during Oct-Dec 00, should be rolled back.
- For promoting the construction of concrete roads, either 50% of the excise duty paid on cement to road building agencies should be remitted to road building agencies or excise duty should be deferred for a period of 5-10 years
- Concrete roads should be made compulsory for more than 2 lanes on the National Highway
- Urban infrastructure should be accorded industry status
- Negotiations should commence with the Governments of Sri Lanka and Bangladesh for zero tariff on cement/clinker imports from India.
- 50% railway freight concession should be granted on exports of cement/clinker.
CII has asked that abatement on Maximum Retail Price (MRP) for white cement should be increased from 40% to 60%. This is however, subject to the need for it being proven by data on post manufacturing expenses, sales costs etc.
Key Players
ACC, Gujarat Ambuja Cement, Larsen & Toubro, Grasim, India Cement, Madras Cement, JK Corp, Jaiprakash Industries, Lafarge, Mehta Group
YOU MAY ALSO WANT TO READ:
The Rediff Budget Special
The Rediff-Dun & Bradstreet Budget Analysis
Run-Up To The Budget
Money
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