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a documentary on cement

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  1. 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. 20024 _________________________________________________________________________
  2. 2. IMPACT OF UNION BUDGET 2011-12Budget 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 companiesCOMPANY NAME IMPACT COMMENTSUltraTech With the major presence in the deficit Western region, passing on will be relatively easier._____________________________________________________________ 25 Professional Risk Opinion
  3. 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.26 _________________________________________________________________________