The finance minister has increased the excise duty on cement in the budget to 10% from the earlier 8%, imposed a cess of Rs 50 per tonne on domestic and imported coal and hiked fuel prices, pushing up freight rates for cement companies. All this is set to make a big hole in the consumer’s pocket.
Analysts with whom DNA Money spoke to, say that an increase of Rs 8-10 is warranted on account of budget measures and anything beyond that is demand push.
Cement prices in the North have risen by Rs 5 per 50 kg bag already and another round of hike is expected soon.
HM Bangur, managing director, Shree Cement, said, “We expect prices to increase by another Rs 10 in the northern belt; it hasn’t risen yet, it will all depend on the demand-supply situation. But as of now for next 4-5 months prices will be stable with the new hike.”
Shailendra Chouksey, wholetime director, J K Lakshmi Cement, said, “Rs 5 per bag hike has been implemented already and the rest of the increase would be determined after seeing the demand scenario. The budget impact in all has been Rs 10 per 50 kg bag but there is hardly any sale right now as construction is on a standstill with workers taking leave for holi. It will take 4-5 days more before we can come to any concrete conclusion.”
In Kolkata and the eastern market, the cement price was raised by Rs 5 a bag before the budget day and with the post-budget hike of Rs 8, the total rise is Rs 13 a bag.
The new retail price is Rs 293 per 50 kg bag and Rs 5 lesser for wholesale buyers.
A dealer from Kolkata said, “Demand is there but there is less clinker in the market, which is putting pressure on supply. Cement is not coming in adequate quantity.”
In Mumbai prices have been hiked by Rs 8-10 too, said a senior member of the cement dealers and stockist association in Mumbai.
He said, “It is a peak period in the western and northern markets and roads, bridges and power sector is consuming most of the material.”
The retail price is at Rs 265 per 50 kg bag and wholesale price is Rs 255 per 50 kg bag.
The steepest hike has come from the most unexpected quarter — the southern market. Dealers in Chennai say prices have been hiked by Rs 5 on the budget day itself and are expected to go up by Rs 25 beginning this week.
The new billing rate is Rs 230 per 50 kg bag and for retail it is Rs 240-245, while the wholesale rate is Rs 225-230. The buying price for builders was Rs 175-190 which has increased to Rs 200-210 per 50 kg bag.
The Tamil Nadu government on Monday implemented the 20 lakh free housing project which increased the cement demand by 3 lakh tonne in the state immediately.
The state is expected to absorb an incremental production of 4 million tonne before June this year.
The consumption figure for March in Andhra Pradesh is expected at 22 lakh tonne whereas in Tamil Nadu it is expected at 17-18 lakh tonne as against previous record of 15 lakh tonne.
Rupesh Sankhe, research analyst with Angel Broking, said, “The impact of excise duty is Rs 4.75-8 per 50 kg bag depending on the area and freight cost is around Re 1 for road with shortage in wagons increasing the dependence on road supply; thus the total impact is around Rs 8-9 per bag.”
“But if the hike is of Rs 11-12 it is at the higher side of the cost band which will give higher margins for the company which is selling below Rs 190-200 per bag. A hike of Rs 25 is not justified as inter-regional movement is not happening,” he said.