Monday, February 22, 2010

H M Bangur, Managing Director, Shree Cement Ltd.

Cement Industry is closely inter linked with the economic growth and is a part of the core sector of the economy. Hence it is imperative that the sector is accorded utmost priority in any set of govt. financial policy. Last year the Industry grew by 8.4%. The industry has added 25 Million ton capacity in first 9 months of current financial year and about 35-40 Million ton is likely to come upstream by March-10. This may lead to bunching of cement capacity and may create oversupply position creating pressures on industry margins.
In view of above, governmental action is required in adequate measures to let the industry maintain its margins and also generate sufficient reserves to continue investment in the sector. I would like the budget to incorporate following considerations of cement industry:
1. Presently cement manufacturers are paying Rs 230 per tonne as excise duty in case retail sale price of cement (50 kg bag) does not exceed Rs 190. Else, excise duty is 8% ad-valorem on MRP. The differential Excise duty structure has not served any significant purpose and should be replaced with single ad-valorem rate of 8%.
2. As in case of White Cement, all other cement categories shall also be allowed 50% abatement.
3. VAT on Cement & Clinker should be reduced to 4% at par with steel.
4. In view of coal shortage in the country, import duty on Coal/petcoke should be removed.
5. All power plants are facing problem of Fly-ash disposal, an environmentally hazardous material. Cement industry utilises fly-ash in environmentally safe manner thereby contributing to environment safety. Hence fly-ash should be supplied free of cost to cement manufacturers.
6. As of now there is uneven distribution of coal among cement industry players. Hence increased quota for coal linkage should be given to Cement industry which should then be evenly distributed among industry players.
7. Industry utilising Waste heat recovery system to generate electricity are contributing to conservation of depleting mineral resources and environment safety. Hence these industries should be given fiscal incentives to promote clean technology.
8. Certified Emission Reduction (CER) are issued by UNFCCC to projects which are contributing to mitigating climate change. Any such effort deserves govt. support and encouragement. Income from sale of CERs enables industry to invest in cleaner technology and hence no tax should be levied on income from sale of CERs.
9. Concrete roads provide several advantages over bitumen roads in terms of initial capital cost saving, long-term life cycle cost saving and fuel saving. Trials undertaken in conjunction with the Central Road Research Institute (CRRI) have established fuel savings upto 14% by loaded goods carriers when they travel on concrete roads. Concrete roads provide maintenance-free service life of 30 - 40 years whereas a comparable type of bitumen road needs relaying within 5 to 10 years. Existing concrete roads in several cities like Pune, Nagpur and other locations have established their long-term durability with almost maintenance free service in some cases for more than half a century testifying to the significant reduction in life cycle cost vis-à-vis bitumen Roads.
As per figures available with the Ministry of Commerce and Industry, the initial cost of a one km. long, two lane highway made with concrete works out 22% cheaper than bitumen road. If life cycle costing is done, as recommended by the BIS, the cost difference becomes really enormous with concrete roads being the winners by a large margin.

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