DELHI/MUMBAI: Cement companies are asking finance minister P Chidambaram, who slapped a dual duty regime on them last year, to reduce local levies and reimpose countervailing duty (CVD) on imports in the forthcoming Budget. Industry players claim that cement is the highest-taxed essential infrastructure input in the country with the combined levies coming to 70% of ex-factory price.

“Reduction of central levies and excise duty on cement is important to make this product more affordable, especially for housing and infrastructure projects,” says industry body Ficci. It is precisely to make cement more affordable and keep inflation in check that the government in the last Budget introduced differential duty structure for the commodity.

Under this, an excise duty of 12% was imposed on cement sold at a retail price of more than Rs 190 per 50-kg bag and less than Rs 250. The government imposed a specific excise duty of Rs 350 per tonne on cement priced up to Rs 190, and a duty of Rs 600 on cement priced above Rs 250. Cement makers are demanding abatement now. DD Rathi, whole-time director & CFO, Grasim Industries, said: “Cement industry is the right case for reducing the customs duty and reimposing the countervailing duty.”

“Whenever excise duty is levied on the basis of MRP, abatement is given. Without abatement, it results in a tax on trade margins and a tax on tax,” says industry body Ficci’s pre-budget memorandum. It cites NCAER report of 2005 suggesting an abatement of 55% for grey cement. Abatement is a percentage reduction from the MRP that will not be taxed, giving room for overheads and trader margins.

Ficci has also urged for a reduction in VAT on cement. It has demanded that the current rate of VAT on cement, which is 12.5%, be brought in line with similar important construction material like steel at 4%. This would certainly help in containing the cement prices by Rs 20 per bag, the industry body says. Vinod Juneja, joint managing director of Binani Cement, said: “In the last Budget, cement sector was one of the neglected sectors. Compared to other countries, the excise duty on cement in India is very high and I hope the new Budget will address the issues. We have also requested the finance minister to impose import duty on cement and reduce import duty on washed coal.”

The weeks following the last Budget generated a lot of heat for the cement sector. Little deterred by the FM’s public call to reduce cement prices or his move to raise duty, manufacturers raised prices, passing the additional duty on to consumers. The prices, however, moved only marginally up after that, except in south India, where rapid hike led to the Tamil Nadu government threatening to take over private cement manufacturing facilities.

A truce followed as the manufacturers agreed to supply a certain amount of cement at a rate lower than the market price. Meanwhile, the Tamil Nadu government also initiated move to import cement to cool off domestic prices.

The Centre’s move last year to remove all import duties, including customs, CVD and special additional duty on the import of cement, did help builders import the commodity. The import so far, however, hasn’t been significant enough due, in part, to delay in Bureau of Indian Standards (BIS) certifications — foreign manufacturers need BIS certification to be able to export to India — and logistic constraints.

The domestic industry is demanding reimposition of CVD on cement imports, saying it would provide a level-playing field to them. The input cost for cement in the past one year has also been rising. The industry has demanded that the import duty on coal and pet coke — an input in the cement industry — be abolished.

16 Feb, 2008, 0149 hrs IST, TNN

Source: economictimes.indiatimes.com