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Cement stocks gain due to excise duty cut

business Updated: May 04, 2007 19:05 IST
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Cement stocks hogged the limelight on Friday, a day after finance minister reduced excise duty on cement making the commodity cheaper by Rs 5 to 7 per bag. Rather than charging a fixed excise duty on cement priced above Rs 190 a bag, the government changed the duty structure and decided to levy an ad-valorem rate of excise duty of 12 per cent of the retail sale price.

This positive news triggered buying interest in cement stocks since beginning of the trading session. Heavy buying in cement stocks backed the 111 points gain in the BSE Sensex during early trade. At that time ACC climbed Rs 22.75, Grasim Industries was up by Rs 57.45 and Gujarat Ambuja Cement up by Rs 1.85.

But later these stocks came under pressure due to profit booking at higher levels. This is line with the all round selling pressure, which made the Sensex to close the day with a loss of 144 points.

ACC closed at Rs 859.05 with a gain of Rs 6.80, Grasim which hit the intraday high of Rs 2,565 came under selling pressure and closed at Rs 2,473.60, down Rs 18.95 from its previous close. Similarly, Gujarat Ambuja, which hit the intraday high of Rs 125 closed at Rs 120.35, down Rs 1.30 a share. However, India Cement closed with a gain of Rs 1.40 at Rs 184.15 as compared to its previous close of Rs 182.75.

“From the beginning of trading, all cement stocks were active. But some of the stocks suffered due to speculative selling in the last 90 minutes of the trading session,” said market analyst Vijay Bhambwani. “They are likely to be active in the next two or three days of trading,” he added.

“There need to be more clarity on the government’s announcement. The notification is yet to be issued. Nobody is sure about the exact tax implications. But it is clear that the government has bowed down before the unbending attitude of cement manufactures,” said an analyst asking not to be named.

Cement prices, which went up by Rs 12 per bag soon after the budget as manufactures passed on the excise duty on consumers, will now come down as the fixed excise duty has been relaxed. To control the spiraling cement prices, the government had increased excise duty from Rs 400 a tonne to Rs 600 for any cement priced above Rs 190 a bag. Now any cement priced above Rs 250 a bag would attract an excise duty of Rs 600 a tonne (Rs 30 for a 50 kg bag).

This means all cement bags priced in the range of Rs 191 and Rs 249, rather than paying a fixed duty of Rs 600 a tonne will pay at the rate of 12 per cent on their retail prices, said a cement company official.