Mumbai, Feb. 28: Finance minister P Chidambaram has tried to beat down cement prices – but cement makers aren’t cowered and say they will raise prices in response to a differential excise duty structure that seeks to reward units that cap prices at Rs 190 per 50-kg bag.

The government has introduced an unprecedented differential duty structure to hold the price of cement: it seeks to cut excise duty on cement by Rs 50 to Rs 350 per tonne for cement that retails at less than Rs 190 per 50-kg bag.

However, it seeks to penalise cement makers selling above that retail by raising the excise duty to Rs 600 per tonne. In the case of mini cement mills, the government has slashed excise duty to Rs 220 per tonne for those retailers who sell it at Rs 190 per 50 kg bag and Rs 370 per tonne who sell it above that price.

The government has never tried this tack before. Two years, it tried to force steelmakers to hold the price line with blandishments and tough talk. It didn’t work. So, now it has decided to adopt for the first time a differential duty structure based on a carrot –and- stick approach. First reactions indicate that the strategy won’t work this time as well.

“Last year, at this time a bag of 50 kg was sold at a maximum retail price (MRP) of Rs 190 or less which, I understand, is a remunerative price. I propose to reward cement manufacturers who hold the price line and tax those who do not,” Chidambaram said.

Cement makers say they would simply pass on the excise burden to the customers as demand continued to remain strong. “Cement prices will go up by Rs 10 to 15 per bag due to increase in 50 per cent excise duty,” Shree Cements’ managing director and vice-president of cement manufacturers association HM Bangur said. “It might be an illusion before the common mass that cement makers will decrease their selling price” Bangur said.

INDUSTRY SPEAK

This budget is disappointing as there has been no steps announced to increase productivity in agriculture, electricity and other sectors which are not producing up to their potential. — R Sesashayee CII president

The Union Budget was on expected lines. The finance minister focussed more on the social sector, agriculture, infrastructure and inflation control, which will have a long-term positive impact on the nation as a whole. As the Indian economy transits from a controlled one to a free one, the Union Budget is gradually losing its all-important stature that it used to enjoy once upon a time, which is a good thing for the nation’s economy. The budget will have no direct impact on the corporate sector. —
S.B. Ganguly Executive chairman & CEO, Exide

The healthcare sector certainly seems to be on the finance minister’srada. Apollo Hospitals welcomes the initiatives taken by the government to lay more focus on healthcare. We are veryappreciative of the increased allocation on healthcare by 21.9%, and also other key steps taken in increased funding for the National RuralHealth Mission, the AIDS control programme, and the elimination of polio. —
Prathap. C. Reddy Chairman, Apollo Group

While the increase in dividend distribution tax will hurt investor sentiments and the capital market, the budget proposals will create a conducive environment for overall economic growth
— V.C. Burman, chairman, Dabur

The budget is a normal routine one with a lot of focus on infrastructure and social security. We had expected some innovative inflationary management approach to the budget which is not very visible at the outset. A revolutionary approach however is the consideration for using forex reserves for infrastructure development.
— Bengal chamber of commerce

Viewed from the overall objective of sustaining a long term India growth story, the budget presented by the Honourable Finance Minister is positive.
Initiatives taken for vocationalisation of education, rural & infrastructure development and for furthering healthcare, reflect continued focus and commitment towards inclusive growth.
— U. S. Roy, MD & CEO,
SBI Life Insurance

As is apparent from the budget, the government is trying to make macro changes in tax rates and laws. Before the budget Indian companies paid company and dividend tax at 41.82 per cent so did the branch of foreign companies. Post rate revision, the cumulative effect would be that Indian companies would be paying taxes worth 43.58 per cent,
while branches of foreign companies would be paying lower taxes at 42.25 per cent
— Rathi Dutta, chairman and CEO, (PwC)

The tax structure is a hybrid type and cement contributes very low in inflation. So I see no reason why such steps should be taken
— D.D. rathi, Grasim CFO