Cement industry seeks subsidy on freight for exports

The domestic cement industry has asked for a 50 per cent subsidy on freight on the logistics cost for cement and clinker for exports in the upcoming budget in July. The cement makers have asked

for the subsidy for the distance between the manufacturing plants and ports.

Since, most plants are in the hinterland and cement is a regional commodity, the freight rates go up. This, thereby, makes exports viable only from coastal units. This also gains importance on the back of

excess capacities being added by the industry. Industry experts pointed out that in case subsidy is given, the industry will be able to route out the excess supply into the export markets — mainly the West Asian countries.

The industry, which has grown by an average of 9.7 per cent in the last three periods, is expected to add around 45

million tonnes of fresh capacity in FY10, taking the overall capacity to over 260 million tonnes per annum.

Besides, the industry has requested for duty restructuring on cement which is a highly-taxed building commodity.

The complicated excise duty structure for cement has prompted the 218-million-tonne industry to demand a rational and simplified duty structure. The industry, in its pre-budget memorandum, has asked for a uniform rate of excise duty on cement. The industry is of the view that levy of duty on cement may be levied at ad-valorem rates at 12 per cent of the maximum retail price with abatement of 55 per cent.

Presently, there are three sets of duties on cement. In case of retail sale price not exceeding Rs 190 a bag of 50 kg, the excise being levied is Rs 230 per tonne. For cement being sold at more than Rs 190 in the retail market, an excise of 8 per cent on the sale price is levied. For institutional sale, 8 per cent of sale price or Rs 230 per tonne, whichever is higher, is levied.

The industry also wants to bring cement in line with steel in terms of value added tax (VAT). “Steel and cement are equally important materials needed for construction activity. While VAT on steel is only 4 per cent, on cement and clinker it is 12.5 per cent,” said the Cement Manufacturers’ Association in its statement to the Ministry of Finance.

The industry is dependent on imported coal and pet coke on the back of short supply of indigenous coal. These items along with gypsum — another input, attract an import duty of 5 per cent. Interestingly, the finished product i.e. cement is being imported without the duty. The industry has asked for abolition of import duty on the input items so that it is in line with the established principles that import duty on inputs should not be higher than that on the finished product.

At the same time, taking a stand against the practice of thermal power plants charging for the supply of fly ash for cement units, cement industry has asked for a free of cost supply of fly ash in line with the principle of “polluter pays”. The domestic cement makers consume 25 per cent of the fly ash generated.