ACC, Ambuja, JK cut prices by Rs 4-7 per bag

Tags: ACC, Companies
Major cement producers on Tuesday announced a cut in prices, following the government’s fiscal stimulus package in which Cenvat was reduced by 4 per cent. Even as it was widely expected that cement prices would fall by Rs 8-10 per bag of 50 kg, the increase in freight charges by the Indian Railways played a spoiler and partially took away the cost advantage. The average price increase has been in the range of Rs 5-7.

Ambuja Cements slashed cement prices by up to Rs 6 per bag. The company said that its 50-kg bag would now be cheaper by Rs 4-6, depending on the specific location. Similarly, Shree Cement said it had sliced the prices by up to Rs 5 per bag. The country’s largest cement manufacturer, ACC too cut the cement prices by up to Rs 5.

JK Lakshmi Cement announced the largest cut. The cement manufacturer slashed prices by up to Rs 7 per bag.

JK Cement also cuts price by up to Rs 5 per bag.

The Railways has increased freight charges on cement by about 8 per cent, and the new rates are effective from Monday. The freight hike happened as the railways changed the classification for coal and cement, which effectively will push cement prices up by Rs 1.50 to Rs 2 per bag.

“After factoring the increased railway tariff, the price of Ambuja Cements is expected to go down by

Rs 4-6 per bag,” the company said in a statement.

Earlier, the cement companies were happy over the reduction in Cenvat and had told Financial Chronicle that the cut had come as a breather for the cement industry at a time when it was grappling with falling demand amid new capacity additions. The high rates of tax were further straining the profit margins. “We welcome the tax cuts and will definitely pass on the benefits to the consumers,” HM Bangur, managing director of Shree Cement and president of the Cement Manufacturers Association had said.

Tax components contribute over 50 per cent to the price of cement. Prior to the cuts, the tax on cement was as high as 14 per cent, while on steel it is 4 per cent. The industry also pays higher royalty on limestone, an essential input for the manufacture of cement.

However, some cement companies had expressed dissatisfaction, as the duties on clinker were not cut. “The government has not declared a similar reduction in excise on clinker, which stays at Rs 450 per tonne. Clinker is the base raw material for manufacturing cement. Ambuja Cements expects the government to shortly announce proportionate reduction in excise duty on clinker, thereby bringing down tax

incidence on cement,” the company added in its statement.

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