Budget 2012: Cement prices may go up by Rs 5 per bag

New Delhi: Cement may become dearer by Rs 5 per 50 kg bag in view of the Budget proposal on Friday to raise excise duty to 12 per cent from 10 per cent earlier, industry sources said.

"The hike in excise duty will push up the sales cost by Rs 5 per bag. Cement makers will obviously try to pass it on to the consumers, but their ability to do so will depend upon the condition of the market where they operate," a prominent industry leader said.

On whether the abatement of 30 per cent on the retail sale price, as proposed in the Budget, would have any cooling effect, he said, "This will not be enough to offset the cost escalation."

The average price of cement was around Rs 285 per bag in the country. But, since cement is largely a regionally-traded commodity, its price varies from one region to another.

The Budget 2012-13 proposed to hike excise and service tax by 2 per cent across the board.

"Despite the abatement of 30 per cent given on the RSP there would be considerable increase in the excise duty. This additional levy coming on the back of recent hike in the rail freight would considerably impact the delivered cost of cement to the consumers and hence the construction cost would go up,"

JK Lakshmi Cement Managing Director Vinita Singhania said.

When contacted, several other cement companies declined to comment on whether they would pass on the increased burden on the customers immediately or not, but almost all, barring Shree Cement, agree that the move would give an upward push to the prices.

Shree Cement Managing Director HM Bangur said the hike in excise duty could well be offset with the abatement of 30 per cent on the retail sale price and as such, there was no cause for price hike.

"We are not going to increase the price. There is no need now," Bangur said.

The cement industry, which has been facing an oversupply situation for some years now, had urged the Finance Minister to slash the excise duty down to 6-8 per cent.

It was of the view that a reduction would have encouraged it to bring the sector at par with other core and infrastructure sectors.