Raised Excise Duty Hurting Cement Makers

February 27, 2007	(Be the first to rate this story!)  Loading ...
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The government has proposed to raise the excise duty on cement to limit increasing inflation. It would be done by bringing a differential duty structure on the commodity. From now onwards, it would cost Rs 600 per tonne if the retail price exceeds Rs 190 per bag whereas it is Rs 408 per tonne irrespective of the retail price.

Cement manufacturers are looking upon the move as an unnecessary step. They want the taxes to be simplified. The compliance cost of administering such a difficult framework will defeat the purpose, says Ajit Rande, chief economist, AV Birla Group. Imposing such a heavy excise duty on selling price will make it hard to monitor and will raise too many litigation issues, say industry experts further. Cement prices are already around Rs 200 per bag. This clearly underlines the reason for industry being anxious over the government’s decision.

Firm prices have led to a superb performance by a majority of cement makers, riding on high demand outstripping supply. Cement manufacturers are showing their anguish on government’s moves to indirectly monitor and control cement rates.

Rates have been doubled by 50% in the last one year, but the cement companies are firm on their arguments and saying that it has risen only 5% on a compounded basis in the last 13 years.

As for the weighted average of the input cost, it has shot up by 4.5% in the past eight years. Cement prices have increased from Rs.100 per bag in the year 1993-94 to Rs. 198 last week, says the weighted price index. The cement industry requires an extra capacity of around 120 million tonne in the next 10 years to support the current GDP growth. However, the target could not be achieved without appropriate amount of funds. The industry has hopes just from those cement players who will reinvest their profits. . Even FDI will come in only if the MNCs sense profitability.

News Published Under:   Real Estate India |

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