The government's move on Monday to abolish customs duty on Portland cement is only symbolic and may not affect the ground reality in India on prices and supplies, say industry experts.
Given the availability of cement in neighbouring countries, infrastructure constraints at ports and problems in transportation and logistics, it would be difficult to have mass scale import of cement in the near future, they say. The government has done away with a 12.5 per cent duty on cement.
"The surplus cement producer countries are Indonesia and Thailand in South East Asia, where there is surplus of around 12 to 15 million," said Bharat Banka, President and Group CFO AV Birla Group.
"They are currently exporting to countries like Bangladesh, where there are no cement manufacturing facilities, and the US, which is a long-term customer," he said.
"It is a well known fact that Indian ports are already clogged, particularly for bulky products. The free on board (FoB) cost of cement in Southeast Asia is between $50 and $55 per tonne. In addition, the freight cost would be around $35 per tonne.
Taking all that, the landed cost of cement in India would be between $85 and $90 per tonne (Rs 3,750 to Rs 4,000), against the domestic price of around Rs 190 to Rs 220 per bag, equivalent to Rs 3,800 to Rs 4,400 per tonne," said the chief executive of a cement company owned by a leading multinational.
N Srinivasan, chairman of Chennai-based India Cement, said that the move was not required. "Over the last 10 years, the increase in the price of cement was least compared to other materials in the construction industry," he said. As far as price of cement is concerned, I don't think there is going to be any impact in near term," he added.
"Huge infrastructure spending on roads, sea ports, airports, irrigation and an explosive boom in the real estate sector would continue to drive demand for cement in the near future," said Kamlesh Kotak, an analyst with Asian Markets Securities.
The Indian cement industry grew by 10.1 per cent year on year in nine months of the current financial year.