Duty reduction will not affect domestic firms, prices: analysts

Duty reduction will not affect domestic firms, prices: analysts
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First Published: Wed, Apr 04 2007. 12 36 AM IST
Updated: Wed, Apr 04 2007. 12 36 AM IST
MUMBAI: The government’s firefighting measures on inflation in cement prices will not yield results for the next four months despite the removal of the countervailing duty of 16% and a 4% additional customs duty, say analysts and cement manufacturers.
“Even if somebody decides to import, it will take one month to set up a port-based warehousing facility,” says a senior official at one of India’s largest cement firms. With the monsoons just a couple of months away, cement imports will become very difficult as the building material absorbs moisture and becomes useless, resulting in huge losses. Given the lack of adequate port infrastructure to carry bulk cargo such as cement—which is a high-volume, low-value commodity—importers who may want to take advantage of lower landed costs of imports will face an uphill task.
But in the short term, the picture is different. “Imports are going to be cheaper by Rs40 for a 50kg bag. This sentiment could drive down cement stocks tomorrow,” says Harender Kumar, head of research at ICICI Direct.
The announcement by the Union government removing the countervailing duty and special additional duty came after the stock markets closed. On Tuesday, the benchmark Sensex rose 1.36%, with major cement stocks gaining between 0.02% and 2.42%.
On Wednesday, the government’s intervention mayweigh heavily on the stock market and cement shares in particular.
A spokesperson for the Central Board of Excise and Customs said: “The objective is to control domestic prices, which are increasing because of a supply shortage. Now it will be far easier to import cement and this will check prices.”
Post-monsoons, though, imports may force domestic manufacturers to drop prices to a level commensurate with the imported cost in India, admit manufacturers.
Companies such as Gujarat Ambuja Cement Ltd, ACC and Ultratech own port-handling facilities and could themselves look at imports to protect their market shares in the wake of any large-scale dumping by foreign manufacturers into India, say experts.
“You can’t discount Holcim importing cement. The government’s move makes it viable for them to import from the Middle East,” says a Mumbai-based research analyst.
shilpa.s@livemint.com
Sanjiv Shankaran contributed to this story.
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First Published: Wed, Apr 04 2007. 12 36 AM IST