The Telegraph
Since 1st March, 1999
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Duty relief for cement, iron ore

New Delhi, May 3: In a surprise move, the government today partially rolled back the budget levies on cement and iron ore.

While participating in the debate on Finance Bill, 2007 in the Lok Sabha, finance minister P. Chidambaram announced an ad valorem duty of 12 per cent on cement if the price is more than Rs 190 per 50-kg bag.

This year’s budget had proposed a specific duty of Rs 600 per tonne. The duty remained unchanged at Rs 350 per tonne for cement sold below Rs 190 per bag.

Cement makers said they would pass on the duty benefit to consumers.

For iron ore fines, the export duty was reduced to Rs 50 per tonne from Rs 300 if the iron content is less than 62 per cent. The rate is unchanged for fines with iron content of more than 62 per cent.

The government and cement manufacturers had been at loggerheads since the budget. After the dual duty structure — announced in the budget — failed to have an impact on cement firms, who refused to cut prices, the government had reduced import duties to make the companies toe its line.

The government had alleged that cement companies had formed a ‘cartel’ to jack up prices.

Chidambaram today said the partial rollback would reduce taxes by Rs 7 per bag. “It’s my expectation that the cement industry will respond positively and reduce the price of cement,” he said.

The Cement Manufacturers Association (CMA) president, Manoj Gaur, told The Telegraph, “We welcome the pragmatic move made by the finance minister. It will certainly help to contain inflation.”

He said the association expected the duty on cement to be down by Rs 6-8 per bag. “The additional savings will be passed on to consumers,” the CMA head said. In iron ore, domestic mining companies can claim victory in their tussle with steel companies over the budget levy.

The mining companies wanted a rollback because of the hit that they had to take on their bottomlines. Importers in China, too, protested the levy.

Steel companies supported the levy as any curb on exports increased the supply of ore within the country.

Chidambaram also announced a review of the banking cash transaction tax, which helped the government track black money.

He also extended the pass-through status to infrastructure projects for venture funds.

The customs duty on nickel was reduced to 2 per cent from 5 per cent, which will benefit stainless steel companies.

During the debate on the finance bill, Chidambaram said the government wanted the inflation rate to fall below 4.5 per cent. He expected the recent measures of the Reserve Bank of India to help moderate prices.

The finance minister said the high inflation rate was because of the rise in global commodity prices, a demand-supply mismatch in food articles, the high GDP growth rate and large capital inflows.

Prices of food and manufactured products are rising on the back of higher salaries.

“The higher rate of growth in gross domestic product has stimulated higher rate of demand for goods and services,” Chidambaram said.

“Many industries are working near full capacity, for example cement, ” he said.

The wholesale price index was unchanged at 6.09 per cent for the week ended April 14.

The Union Budget 2007-08 focussed on agriculture, Chidambaram said, adding that this was aimed at enhancing the supply of essential commodities to check rising prices.

“We have not hesitated to provide finances to import food items to meet the rising demand,” he said.

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