NEW DELHI: The government said on Wednesday that efforts to control cement prices through a differential tax structure could fail, while renewing its appeal to manufacturers to roll back the post-Budget hike.
“The different excise slabs were mooted to check prices because it has been successful in one state in the past. We may succeed or not succeed in our objective,” finance minister P. Chidambaram said in the Rajya Sabha.
He was replying to his predecessor and senior BJP leader Yashwant Sinha, who said that cement manufacturers have rebuffed the government by raising prices, thus defeating the very purpose of the move.
“We will still appeal to the cement manufacturers to control prices,” he said, adding that the government had to act the way it did as prices of cement had risen by 40% in the last one year.
Sinha said while commerce and industry minister Kamal Nath has managed to force cement companies to freeze prices, the finance minister does not have the clout to call cement manufacturers and ask them to reduce prices.
Cement manufacturers had hiked prices by Rs12 per bag of 50kg following the budgetary proposal to increase excise duty on the construction material by Rs200 per tonne to Rs600 on cement sold at a retail price of more than Rs190 per bag.
Chidambaram, during his Budget speech on 28 February, had, however, proposed reduction of duty by Rs50 per tonne to Rs350 on cement sold at up to Rs190 per bag. Though manufacturers agreed to hold the existing price line for one year, they said it was not possible to roll back the hike without duty concessions.
Meanwhile, supply-side constraints continued to affect the cement industry, leading to slowdown in the growth in production of the crucial construction material in the first 10 months of this fiscal.
According to official figures released on Wednesday, cement production grew by 9.5% at 131.88 million tonnes (mt) from April to January 2006-07, compared with 11.4% a year ago.
Production growth in cement slowed down by more than half to 6.8% in January against 15.4% in the same month last year. In absolute terms, cement production stood at 14.5mt in January 2007 against 13.57mt in January 2006 and 11.76mt in January 2005
This fiscal, cement production growth slowed down in five of the 10 months, figures for which are available. Besides January, growth in cement production was lower in May, June, August and December.
Particularly in the month of August, cement production slowed down to a mere 2.3% against 19.3% a year ago because of the monsoon.