a documentary on cement

1. CEMENT
Industry Snapshot
Cement demand in the country was predominantly driven by domestic consumption in the last five
years. Domestic cement consumption registered a CAGR of 9.9% during the period FY06 to FY10.
In FY10, cement consumption recorded an impressive double-digit growth of 11.1%. Average
cement prices (four metro cities) rose by about 3% on yoy basis in FY10.
In the first nine months of FY11, cement demand grew by 5.1% on yoy basis. Average cement
prices have dropped by about 2.2% on y-o-y basis during the same period. The industry is expected
to register capacity addition of about 65 mn tonnes in the period FY11-12. Surplus capacity is
expected to put pressure on cement prices.
Duty Structure
CUSTOMS DUTY PRE BUDGET POST BUDGET IMPACT
OPC / PPC Nil Nil
Coal 5% 5%
Gypsum 5% 2.5%
Pet Coke 5% 2.5%
EXCISE DUTY
PRE BUDGET POST BUDGET IMPACT
(Rs. per tonne)
• Retail 10% ad-valorem
• Price below Rs.190 290 +Rs. 80
per 50 kg bag
• Price above Rs.190 10% ad-valorem 10% ad-valorem
per 50 kg bag +Rs. 160
10% ad-valorem
• Bulk 290 or 10% ad-valorem
whichever is higher
10% ad-valorem
• Clinker 375
+Rs. 200
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2. IMPACT OF UNION BUDGET 2011-12
Budget Proposals
1. Provision of Rs.2,14,000 crore for the infrastructure development in the country which
accounts for over 48.5 per cent of the Gross Budgetary Support to plan expenditure.
2. Under Bharat Nirman, Rs.58,000 crore allocated for the rural infrastructure programmes.
3. Scheme of one per cent interest subvention on housing loan is extended upto March 31,
2012 for a loan amount upto Rs.15 lakh (increased from Rs.10 lakh), with the cost of the
house not exceeding Rs.25 lakh
4. The corpus of Rural Infrastructure Development Fund (RIDF) XVII has been raised to
Rs.18,000 crore in 2011-12 from Rs.16,000 crore in the current year 2010-11. The additional
allocation would be dedicated to creation of warehousing facilities.
5. Custom duty on Gypsum and Pet Cock is proposed to be reduced to 2.5 per cent.
6. Hike in excise duty on cement & clinker as per the details given in the duty structure above.
Impact on the industry
• The cement industry will remain buoyant given increased impetus of the government on
infrastructure development. Infrastructure sector accounts for almost 25% of the total
cement consumption in the country.
• The rationalisation in excise duty through composite rates will hike the cement prices by
about Rs.8-8.5 per bag across different regions, which is likely to be passed on to the
consumers. However, cement companies operating in the oversupply markets like South will
find it difficult to pass on the hike in excise duty to their consumers.
• Reduction in custom duty of Gypsum and Pet coke will have a very negligible impact on the
cost structure of cement companies.
Impact on companies
COMPANY NAME IMPACT COMMENTS
UltraTech With the major presence in the deficit
Western region, passing on will be
relatively easier.
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Professional Risk Opinion

3. COMPANY NAME IMPACT COMMENTS
ACC Pan-India presence. However, major
operations in surplus region would
make it difficult to pass on the rise in
excise duty.
Ambuja Relatively easier to pass on with the
major presence in deficit Western
region.
Shree Cement Marginally positive on cost front.
However, passing on the rise in the
excise duty will be difficult.
India Cement The Major presence in the Southern
region would make it difficult to pass
on the rise in excise duty.
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