Cement makers decline to oblige

NEW DELHI: Finance minister P Chidambaram on Monday defended the differential tax model proposed in the Budget for the cement industry, saying that the government has a responsibility towards the people to moderate prices. He said the government has a duty to hold the priceline and suggested that the cement industry can sit together and seek a meeting with the government later.

Cement manufacturers, however, were in no mood to pay heed and flatly told the government that they will not reduce prices. They conveyed this to industry secretary Ajay Dua later in the day.

The stand-off between cement makers and the government started after Chidambaram raised excise duty by Rs 50 from Rs 400 for cement sold at Rs 190 per 50 kg bag. The excise duty was raised by Rs 200 per tonne for cement sold above this rate.

The very next day, cement manufacturers responded by increasing prices by around 6%.

On Monday morning, at a post-Budget meeting organised by the Federation of Indian Chambers of Commerce and Industries here, Chidambaram argued that the government was not resorting to price control in the cement sector and invited industry players for talks on duty differential issues.

“Our duty is to hold the priceline and the industry must cooperate,” he said. While pointing out that moderating inflation is good for everyone, Chidambaram stressed, “We are confident we can moderate inflation.”

“But we need the co-operation of the industry. The opportunity to profit in short term should not cloud our thinking,” he said. Long-term price stability is a fundamental feature of a sound economy,” he said.

Even as the Indian economy is set to grow around 9% this financial year, the annual inflation rate is above 6%, which is a two-year
high.

Reiterating the thrust on agriculture in the Budget, Chidambaram said: “The Budget is an occasion and platform to mount new ideas and experiment with new themes.”

Although this government delivered high growth, it was a skewed growth, led by industries and services, according to Chidambaram. “It was not inclusive growth so far, and that left agriculture behind.” So, this time, “we decided to embrace the rural segment in the growth story,” he said.

While not giving in to industry demands on withdrawing fringe benefit tax on ESOPs, and exempting IT industry from minimum alternate tax, Chidambaram said: “The corporate sector has been doing very well. And there’s no reason to believe that 2007-08 will not be another good year for the corporate sector.” But, the FM added, “It is not enough to put our heads together, we must put our hearts together as well.”

Chidambaram further said that “producers deserve better prices and consumers want moderate prices.” And therefore, the government must pay greater attention to ensure that the producer deserves better prices, he said. “Growth is measured by output. And, our focus is on increasing productivity.”