Mumbai, March 4: Cement prices are expected to remain stable at current levels despite the decision in the Union Budget to bring down the effective customs duty on cement from 38.5 per cent to 25 per cent. Analysts point out that the import duty reduction would not in any way affect the reigning prices as cement imports to India were negligible. The effect,if any, would remain confined to coastal areas,they add.The industry seems to be unanimous in putting up a brave face to the threat of cement imports. Insiders are of the opinion that it is unviable for any Asian supplier to compete in the Indian market unless they resorted to dumping which would inevitably result in anti-dumping measures prescribed by the WTO.However, Indian cement majors feel that the cut could have been avoided.
Gujarat Ambuja chairman Suresh Neotia, in a budget reaction to The Financial Express said: "The reduction in custom duty on cement and clinker from 35 per cent to 25 per cent was not really necessary."
On the cost side, the hike in freight charges on coal by 2 per cent and furnace oil by 1 per cent is expected to marginally increase the input price.
But what could be interesting is the hike in polymer prices by domestic firms including Reliance, despite a cut in customs duties on PTA and MBG.
Polymer is an important constituent in packing material for cement. Analysts add that if the rate of increase of polymer prices cross the rate of inflation, then it could pose a problem on the cost aspect to cement companies.
The thrust on infrastructure in the budget, with a 93 per cent fund hike has also been welcomed by the industry.
But industry feels that it remains to be seen whether it does actually take off. This is felt because despite similar provisions last year, many of the infrastructure projects failed to take off. Moreover, some industry associations feel that something more could have been done on this front.
According to Confederation of Real Estate Developers Association of India (CREDAI) president Kumar Gera: "It is a great budget. However, on the housing front it has fallen far below expectations. This will lead to a softening of cement prices and will marginally boost housing demand as a result of increasing deduction on interest paid on a housing loan from Rs 1 lakh to Rs 1.5 lakh. But the areas ignored are under Section 801A under which exemptions for large housing schemes ends by April 1, 2003. An extension of this was absolutely necessary. Also many of the deeper reforms expected have not materialised."
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
