Battered cement stocks makers bounced back on the bourses amid hopes that cement plants set up after 1 April will get a five-year tax break.
Although neither cement industry executives nor the Cement Manufacturers’ Association of India (CMAI) is in the know, analysts point out that prices of battered cement stocks have started to recover, on the assumption that the government will wave the white flag sooner than later.
Barring a few exceptions, almost all major cement stocks rose.
Shree Cement gained 7.27% to Rs1,022.80 and India Cement rose 6.5% to Rs172.80. ACC, India’s largest cement maker, rose 1.22% to Rs748.30 and Gujarat Ambuja rose 3.36% to Rs110.90.
Aditya Birla Group company, Grasim gained 4.02% to Rs2,124.15 and UltraTech gained 2.83% to Rs797.75. Among the few losers, Chettinad Cement lost 1.28% to Rs410 and Mysore Cement lost 0.12% to close at Rs40.45.
Since the 28 February Union Budget, cement makers have been at loggerheads with the government over prices, which have risen over 40% to a peak of Rs255 for a 50kg bag, in Mumbai, India’s largest cement market.
Manufacturers had hiked the retail price of cement by Rs12 per 50kg bag after the Budget announced a hike in excise duty by Rs200 from Rs400 to Rs600 if cement was sold above the retail price of Rs190.
Since the price of cement was above Rs200 all over the country, manufacturers passed on the additional excise burden to customers by hiking the cement price.
Manufacturers have so far not paid heed to the Centre’s call to roll back prices, but have promised to freeze the prices for a year, which sent their shares sliding.
The cement industry’s current capacity is 165 million tonnes per year and capacity utilization has been 92% this year, according to CMAI.
Cement production, at 127 million tonnes in the first 10 months of the financial year 2006-07, has seen a growth of almost 10%.
Meanwhile, the government has invited cement makers for talks later in the week, hoping that they will “realize their responsibility and moderate prices.”
Finance minister P. Chidambaram had said the government was keeping a careful watch on the cement price situation.
“The recent price surge was purely because of market demand. In fact, the government has realized that it can’t do much to reduce the prices.So, it is trying to give some benefits to the cement firms to bring down the prices,” says a Mumbai-based cement industry executive who did not want to be named.