Prices expected to fall after excise duty cut on fuel

The cut in excise duty on fuel by India’s government is expected to lead to price reduction for cement users as the cement industry saves on transport and freight costs, according to companies and analysts, reports Business Standard. In April most cement companies increased prices by 8.3 per cent to INR390 (US$5.02)/50kg bag with expectations for May indicating a further price increase. However, according to analysts, there could be a reduction of the price by as much as INR15/bag although some forecast a significantly smaller price cut.

Shravan Shad, VP research and analyst of infrastructure and construction at brokerage company Dolat Capital forecasts a price decrease of INR3-5/bag. "It is a marginal drop in terms of cement prices. But if viewed against the persistent inflationary pressures that cement companies have been feeling in recent months, the price cut will be a welcome move," Mr Shad said.

"We will most likely take a price cut of INR5 per bag because of the excise duty reduction on diesel. Transporters will gain from this move and those benefits will be most likely passed to us. We will, of course, pass those benefits to the consumer," said H M Bangur, managing director of Shree Cement.

UltraTech Cement and JSW Cement have yet to announce a price reduction, but Mr Bangur said that the trend will become clearer in the next few days.