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Editorial
Welcome move
India, perhaps, is the only country in the world offering incentives for setting up new cement capacities. But, these tax incentives offer an unfair advantage to the new players by allowing them to retain the sales tax collected from consumers. The players use these incentives to penetrate the market by undercutting on competition, and in the process distorting the market. As a result, even inexperienced entrepreneurs have been tempted to enter the field. This is why the Indian cement industry is the most fragmented (except China) in the world. It is a peculiar situation where none of the players have a marketshare of over 12 per cent making it impossible to maintain a price discipline.The proposal to withdraw the incentive has been long overdue. Alongside it should also reduce the tax incidence on cement, which at 30 per cent of the selling price is also one of the highest in the world. Minus the incentives, prices are bound to rise. And a reduction in taxes might help soften the blow on the consumers.
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