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|March 01, 2001||Feedback|
Sector Focus: Cement
Cement industry: Post budget
Cement: State of the industry (2000-01)
Cement: Tariffs and prices
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: Budget impact
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.
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