Steel, cement sectors to gain

MINI BUDGET 2004

Cement companies are set to reap significant benefit from today's mini Budget. Industry leaders said the government's decision to snip the customs duty on coal by 10 per cent -- from 25 per cent to 15 per cent -- would have a positive impact on the bottomlines of cement companies.

The steel industry will also benefit from this duty cut, though the impact will not be that significant.

India's largest steel producer, the Steel Authority of India (SAIL), imports almost Rs 2,000 crore of coal for steam and its bill will shrink considerably. Jindal Vijaynagar Steel and Ispat Industries are the other steel companies that will also benefit.

Steel sector analysts said the overall impact of the duty would be beneficial for the sector as the rising coal prices were one of the primary causes of the steep rise in steel prices.

Anil Singhvi, executive director, Gujarat Ambuja Cements said, "The comnbined impact of the reduction of import duty on coal from 25 per cent to 15 per cent and the abolition of the 4 per cent special additional duty (SAD) will help companies to further cut their cost of production and be more competitive."

Gujarat Ambuja imports around 500,000 tonnes of coal every year. The existing landed price of coal is around $60 per tonne.

D D Rathi, chief financial officer, Grasim Industries, said since the imports of coal would become cheaper, domestic prices of coal were likely to soften.

"This will definitely have a positive impact on the margins of cement companies," he pointed out. However, he did not quantify the impact on the bottomlines of cement companies on the account of the varied nature of coal imports.

Y M Deosthalee, chief financial officer, Larsen & Toubro said, "The cut in customs duty on coal will benefit the cement industry. However, this may be offset by international coal and freight rates increasing."

Analysts said the rising rupee had already reduced the import bill of cement companies significantly in rupee terms.