Finance Minister P Chidambaram’s proposal to increase excise duty on cement clinkers has met with apprehension from the industry which feels it could adversely affect mini and small plants, although the overall Budget was welcomed as a “positive one”.

The finance minister proposed an excise duty of Rs 400 per metric tonne or 14 per cent ad valorem, whichever is higher on bulk cement. Earlier it was a flat excise duty of Rs 400 per metric tonne in bulk cement. Further, he also increased excise duty on cement clinkers by Rs 100 to Rs 450 from Rs 350 per metric tonne.

Reacting to the proposals, Ambuja Cements Managing Director A L Kapur said it (increased excise on cement clinkers) would adversely affect the mini and small plants, especially those in Uttarakhand and northeastern states. “... It will deter the companies to sell and set up clinker plants in backward states, like Uttarakhand and the northeast. In one sense, concession given to set up clinker units in these states have been withdrawn,” Mr Kapur said.

He said usually independent clinker plants are set up in these states, which sell clinkers to cement manufacturers. The industry, however, does not see an immediate impact of the increase in excise duty on bulk cements.

Retail duties

“Bulk cement supply is hardly two per cent in the country. So there should not be any impact on the industry as a whole,” Cement Manufacturers’ Association (CMA) President H M Bangur said. As the duties on retail have been kept untouched there was no foreseeable change in the price, he added.

However, Mr Kapur of Ambuja Cements said cement industry was expecting some relief from the budget. “On the contrary, there has been an increase of excise duties on bulk and clinker sale,” he said. He said unless the manufacturers absorb the duty hike, the prices of bulk cement to institutions and builders would be increased.