Cement Prices to Increase in NCR Post Pet Coke Ban

India Ratings and Research (Ind-Ra) expects cement prices in northern India to increase, due to the Supreme Court's order to ban the use of pet coke from 1 November 2017 in National Capital Region (NCR). There would be intermittent headwinds as cement manufactures could have some inventories of pet coke in place and the court has not clarified on the use of this stock post ban. The development is credit neutral for Ind-Ra rated cement manufacturers.

Cement players in the northern region particularly from Rajasthan (where most of the clinker plants are situated) will have to use either domestic coal or imported coal from 1 November 2017. This will result in an increase in power and fuel cost per tonne per bag by INR8-10. Cement producers will pass on this increase in costs to the final consumer, leading to an increase in cement prices.

According to Environmental Pollution (prevention and control) Authority's clarification dated 27 October 2017, such ban will be applicable only in those districts of Uttar Pradesh, Haryana and Rajasthan which fall under NCR; however if the state governments fail to issue a similar notification, then the ban will automatically be applied to the whole state, impacting all cement manufacturers. Industries using pet coke and furnace oil will have to comply by the norms issued by Central Pollution Control Board latest by 31 December 2017.

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