FM’s denial on price freeze takes cement stocks higher

INDIATIMES NEWS NETWORK JUNE 28, 2007 MUMBAI: The finance minister’s statement on cement prices has helped ease the tension between the government and industry. P Chidambaram said there was neither a freeze nor any plan to interfere with cement pricing. The reaction of the stock market has been immediate, with cement shares up since morning. “There is no price freeze. In fact, prices have moved up a few rupees in South India. I think, the price increases effected by the cement manufacturers were completely unwarranted. Yet, because we believe in a market-driven economy, we did not impose price control,” said Chidambaram in an interview to a TV channel Wednesday. ACC shares ended nearly 9% higher at Rs 902, Grasim surged 5.2% to Rs 2,633, India Cements climbed 10.78% to Rs 206.50 and Gujarat Ambuja Cements added 7.43% to Rs 125.10. Over the past one year, cement companies had recorded very high profits. This led to changes in customs and excise duties, with the potential to considerably reduce the growth rate in profit in the current fiscal. In January, the government removed the customs duty of 12.5% on cement in an attempt to curb price increase. The Union Budget 2007-08 introduced a differential excise duty based on retail price. If the MRP exceeded Rs 190 per 50 kg bag, then the excise duty on cement (for large players) stood increased from Rs 400 per tonne to Rs 600 per tonne. Taking advantage of the demand-supply scenario, cement companies had increased cement prices by Rs 10-12 per 50 kg bag. But the government pressure forced cement manufacturers to stay prices for a year. The government later removed the 16% countervailing duty and 4% special additional customs duty on imported cement. This was done in order to make imported cement more viable than domestic cement. But the industry refused to roll back the price hike arguing that since the government had removed the countervailing and special additional duties even after the industry agreed not to raise prices, the price-freeze agreement with the government stood cancelled. Cement stocks had been underperforming the market since the announcement of the price-control measures. Source : http://economictimes.indiatimes.com/FMs_denial_on_price_freeze_takes_cement_stocks_higher/articleshow/2157311.cms