K. T. Jagannathan
Differential excise duty announced
CHENNAI: Far from forcing a reduction in the prices, the differential excise duty on cement announced in the Union Budget for 2007-08 may see the cement industry passing on the burden to the end consumers. Most cement producers have already decided to increase the prices in the wake of the budget proposal. Indications are that the price will go up by at least Rs.15-20 per bag of cement in Chennai.
The latest budget has reduced the excise duty from Rs. 400 per tonne to Rs. 350 per tonne on cement sold in retail at not more than Rs.190 per bag. However, if the MRP (maximum retail price) is above this level, the duty will be at Rs. 600 per tonne. One saw a similar exercise in Tamil Nadu when the previous AIADMK Government embarked on a differential sales tax on cement a few years ago.
"We will pass on the excise duty,'' said a top industry source. In most states, industry sources said, the cement prices had been ruling above Rs.190 per bag. "The perception that the cement prices are ruling unduly high is wrong,'' said N. Srinivasan, Vice-Chairman and Managing Director of India Cements. The cement prices, he pointed out, had remained unremunerative for quite sometime. "We saw the correction happening only last year,'' he added. "Market conditions are such that the duty hike can be passed on,'' Mr. Srinivasan felt.
According to A. V. Dharmakrishnan, Executive Director (Finance), Madras Cements, the differential duty introduced in the budget "has a lot of implications''. He said the industry was trying to understand the implications of the move.