Price hike needed to stay afloat, say Hyd cement firms
Jul 22 2014
My Home Industries executive director S Sambasiva Rao said the cost construction material like sand, bricks and others have increased with inflation. However, cement prices remained low, which led to losses to the cement makers.
The cement industry said the manufacturing cost of cement per bag was Rs 185 to Rs 200. The excise duty was Rs 40, VAT Rs 45 and the average transportation cost was Rs 65-85 taking the total cost to Rs 335 per bag. The cement industry could survive only if it got prices that were equivalent to cost plus minimum margin as return on the investment, he said citing that the price of cement in Hyderabad was Rs 315 and Rs 325 in Visakhapatnam.
“Many firms were not in a situation to pay sales tax and hence were forced to pay in instalments”, said Sagar Cements joint MD S Anand Reddy. With coal shortage, many were depending on imported coal and the fall in rupee value against the dollar increased the freight costs. In addition, there is customs duty on imported coal. The domestic coal price increased 100 per cent in four years - from Rs 2,553 a tonne in 2010 to Rs 5,459 in 2014.
The power costs have gone up 70 per cent during the last two years as many have purchased power from other sources or have put up captive power plants. The transportation costs have increased with every increase in the cost of diesel, the cement industry representative said Countering the claims of the builders that the cost of construction would go up by Rs 100 per sqft, the cement makers said cement accounted for 3 per cent of the total construction cost and now it will be about four per cent. The increase of Rs 50 to 60 per bag will have an impact of Rs 20 per sqft.
They said the builders from Hyderabad and other parts of Telangana were buying cement from plants in Karnataka and Maharashtra. They were able to get cement on CST of two per cent whereas the cement makers paid VAT at the rate of 14. 5 per cent on cement sales in Telangana. Due to this, the state government lost about Rs 200 crore per annum.