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Sector Focus: Cement

Cement industry: Post budget

Cement: State of the industry (2000-01)

Cement: Tariffs and prices

	Tariffs						Domestic prices
	Customs1		Excise2		Abatement rate1		(Rs/bag)
	00-01	01-02	00-01	01-02	00-01	01-02	Jan 2001
Portland cement	44.0	30.0	350	350	-	-	-
- Chennai	-	-	-	-	-	-	197
- Delhi	-	-	-	-	-	-	150
- Kolkata	-	-	-	-	-	-	182
- Mumbai	-	-	-	-	-	-	177
Portland cement bagged outside factory premise	44.0	30.0	332	332	-	-	-
White cement3	44.0	40.4	24.0	32.0	40.0	40.0	550
Cement clinker	44.0	30.0	200	200	-		-
Limestone4	32.6	30.0	-	-	-	-	-
Gypsum	32.6	30.0	-	-	-	-	-
Non coking coal	32.6	30.0	-	-	-	-	-

1 Customs duty and abatement rate is in per cent.
2 Excise duty is in Rupees per tonne.
3 Excise duty for white cement is in per cent.
4 Royalty on limestone is Rs 40 per tonne, with effect from November 2000.

Source: CRIS INFAC

• Cement demand is expected to increase by 3 per cent as compared with that in 1999-2000, due to the higher base of 1999-2000, drought in major states, and lower government spending.
• On an average, prices are expected to be higher across all regions as compared with those in 1999-2000, largely due to producer efforts to rationalise supplies.
• Cement manufacturing costs are expected to increase by Rs 5-6 per bag, due to an increase in the costs of power, packaging, coal and freight.
• Profitability of cement companies is expected to be higher in the second half of 2000-01, as compared with that in the first half of 2000-01, largely due to higher realisations.

Cement: Budget impact

Impact factors

Company name	Impact	Impact factors
ACC	Neut	C,D
(182.55, 177.85)
Birla Corp.	Neut	C,D
(21.45, 21.20)
Gujarat Ambuja	Pos	B,D,E
(184.0, 188.20)
India Cements	Pos	B,D,E
(56.45, 57.90)
Madras Cements	Pos	B,D,E
(4898.85, 5000.00)

Notes:
Figures in brackets indicate the closing share prices, on February 27, 2001 and February 28, 2001, respectively.
pos= positive neg= negative neut= neutral

Source: CRIS INFAC

A: The reduction in the customs duty on grey cement and on clinker is not expected to have any significant impact on the industry. Imports of grey cement are unlikely due to infrastructural bottlenecks. Excise duty on grey cement has remained unchanged. However, the government has exempted the excise duty on cement which will be supplied for reconstruction of the earthquake affected areas in Gujarat.

B: The reduction in the customs duty on non-coking coal is expected to have a marginally positive impact on the industry. Producers, such as Gujarat Ambuja, Larsen and Toubro, India Cements and Madras Cements, who use imported non-coking coal, are expected to benefit, as on an average, coal accounts for 15-20 per cent of their total operating costs.

C: The increase in the railway freight by 3 per cent on cement and 2 per cent on coal is expected to have a marginally negative impact on the industry. On an average, manufacturing costs are expected to increase by upto Re 1 per bag. However, producers, such as ACC and Birla Corporation are likely to be affected more, due to higher dependence on rail and on domestic coal.

D: The continued government thrust in the housing and roads sectors is expected to have a positive impact on the industry. In the Union Budget 2001-02, the tax exemption on interest payment for housing loans has been increased, from Rs 1,00,000 to Rs 1,50,000, and in the road sector, the plan outlay has been increased by 93 per cent, to around Rs 87.3 billion.

E: The reduction of surcharge on corporate tax, from 13 per cent to 2 per cent and the expected decline in interest rates, is expected to have a positive impact on producers, especially Gujarat Ambuja, Madras Cements and India Cements, due to their relatively high tax outflows.

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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