Import duty removal ravages cement stocks

Import duty removal ravages cement stocks
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First Published: Thu, Apr 05 2007. 10 33 AM IST
Updated: Thu, Apr 05 2007. 10 33 AM IST
Mumbai: The stocks of almost all cement firms fell on Wednesday, in response to the government’s decision to cut import duty on cement, even as the Bombay Stock Exchange’s benchmark index of 30 stocks, Sensex, gained 1.28%.
Domestic cement firms have decided to wait and see the impact the removal of the 16% countervailing duty and the 4% special additional duty on cement has on ales. Imported cement is expected to cost about Rs25 lower for a 50-kg bag.
Apart from the scrip of India’s largest cement manufacturer ACC, the stocks of all major cement firms lost between 0.4% and 6% on the bourses.
Dalmia Cement was the biggest loser. The stock closed at Rs351.5, losing 6.14%. It was followed by UltraTech Ltd, which closed at Rs677.7, down 4.91%; JK Lakshmi closed at Rs98.65, down 4.59%; and Madras Cement closed at Rs2542.85, down 3.44%.
“ACC has gained and Gujarat Ambuja Cements Ltd (GACL) has lost marginally. This could be due to the talks that Holcim might look at importing cement,” said Harender Kumar, head of research at ICICI Direct, a retail brokerage. The world’s second-largest cement manufacturer, Holcim, holds around 37% stake in ACC and 28% in GACL and both the companies have their own jetties and other port facilities that are required for importing cement.
Analysts who did not wish to be identified said Holcim could import cement to retain market share. The GACL scrip closed the day at Rs104.95, down 0.43% and ACC closed at Rs714.45, up 1.37%.
The government’s move has, however, made cement manufacturers, with whom it was engaged in a skirmish, unhappy. The government wanted them to lower or maintain prices and announced a disincentive tax that was aimed at preventing them from raising prices in this year’s Union Budget. The firms decided to raise prices and pay the tax.
The government’s desire to control the prices of cement is part of its larger fight against inflation, which was at 6.46% in the middle of March. “Cement prices in India have gone up only because of change in excise structure and not for any other reason. If government wants the prices to come down, it should abolish excise duty, the same way it did in case of import duties, and provide level-playing field to the domestic industry,” said Manoj Gaur, president, Cement Manufacturers’ Association of India, an industry body.
Average cement prices increased to Rs220 per 50-kg bag in March 2007 from Rs209 in February 2007.
PTI contributed to this story.
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First Published: Thu, Apr 05 2007. 10 33 AM IST
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