The government of Tamil Nadu, India, has proposed a levy of an additional INR160/t (US$1.84) on limestone with effect from 20 February 2025. It follows the introduction of an INR25/t tax on limestone mined in Karnataka.
The tax, which is in addition to the royalty payable on limestone mining, will be payable in advance on dispatch of minerals from mineral-bearing land.
It is expected that the tax will have a significant impact on the production costs of local cement producers. "We expect additional impact of INR200/t on RM [raw material] costs if the purposed taxes are implemented. Players with higher exposure in the state are The Ramco Cements, Dalmia Cement (Bharat), The India Cements," said InCred Equities. The India Cements operates 90 per cent of its total installed capacity in Tamil Nadu while The Ramco Cement and Dalmia Cement (Bharat) run 51 and 31 per cent, respectively of their total installed capacity.
"To pass on this cost increase, Tamil Nadu-based players require to hike cement prices by INR8-10/bag. Besides, we see increasing possibility of other mineral-bearing states imposing additional levies in future," said brokerage JM Financial.
"Accordingly, industry players will undertake gradual price hikes to pass on the same, in our view. Pricing behaviour over the coming months is a key monitorable," added JM Financial. Over the past few years, cement prices have been declining in the state.
Furthermore, based on JM Financial's estimates, this is likely to have an EBITDA impact of approximately nine per cent for The Ramco Cement and around three per cent for Dalmia Cement (Bharat) on FY26-27 estimates.
Share prices have been affected by the announcement with Dalmia Cement (Bharat) seeing its share price fall five per cent, Ramco Cement's six per cent and The India Cements' four per cent, reports Moneycontrol.
