Hurt by a Rs. 100 per tonne excise duty hike in the budget on top of an increase in rail freight, cement makers are likely to increase retail prices by Rs.15-20 per bag soon.
“The excise duty hike of Rs. 100 per tonne is set to raise our manufacturing cost by Rs. 5 per bag. This is over and above a Rs. 7-10 rise in manufacturing cost due to freight rate hiked in the Railway budget. Such a huge impact is beyond the capacity of the cement firms to absorb. They have to pass it on,” a senior industrial official said. Owing to the hikes effected in the general as well as the Railway budget, the official said, the retail price of the building material is likely to go up in the range of Rs. 15-20 per bag immediately.
“Tariff rate of excise duty in goods falling under Chapter sub-heading 2523 29 is being increased from Rs. 900 per tonne to 1,000 per tonne,” Finance Minister Arun Jaitley said in his Budget speech on Saturday. Railway budget also proposed increasing freight rates of coal and slag, used in the making of cement, by Rs. 45.70 per tonne and Rs. 20.9 a tonne respectively; and also hiked rate by Rs. 21 per tonne for cement.
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Rating agency ICRA recently said cement companies raised prices by Rs 5-20 per bag in October but prices again came under pressure in the months of November and December due to slow recovery in demand. The average wholesale cement prices in Delhi dipped from Rs 290 a bag in July to Rs 268 per bag in September last year. Post—monsoon, prices increased to Rs 288 per bag in October but again declined to Rs 260 per bag in November and Rs 253 a bag in December. ICRA said though there had been a slow recovery in cement demand and the prices post monsoons, the profitability of the cement firms improved in the first half of 2014—15 but still remained subdued.