Cement-makers today indicated that they will have to raise prices as it is not possible for them to absorb the increased freight charges on account of hike in diesel price.
"The increased freight is not going to impact only on the distribution of finished goods. Generally, it takes two tonnes of inputs to produce one tonne of cement. So, the impact will be on a total of three million tonnes freight. I don't think the industry is now in a position to absorb this," JK Lakshmi Cement Whole-time Director Shailendra Chouksey told PTI.
Following the Rs 5.62 a litre hike in the price of diesel last evening, apex truckers' body All India Motor Transport Congress (AIMTC) today effected a 15 per cent increase in the freight charges across the country. AIMTC claims to have around 80 lakh trucks under its fold.
Commenting on the impact of the hike in diesel prices, a major cement producer, which preferred not to be quoted, said the hike was indeed a stiff one and this would certainly push the distribution cost for cement makers, which could not be absorbed.
"The hike will have a strong impact on the cement makers and it can't be absorbed," he said.
Incidentally, cement prices have come down, mainly because of monsoon when construction work comes to a near standstill, by an average of 15 per cent since April and is now trading in the range between Rs 250 and Rs 260 for a bag of 50 kg, across the country.
The current over-capacity situation in the cement market is also a major hindrance for the cement industry to increase the price of the building material. This situation is unlikely to improve in the next three years, Ultratech had said in its latest annual report.
According to a recent report by brokerage firm Anandrathi, all-India cement dispatch grew 6.9 per cent in FY'12 to around 225 million tonnes against 5.1 per cent in the previous fiscal.
The capacity utilisation by the industry was at 76 per cent in FY'12, same as in FY'11. India's cement making capacity now stands at over 330 million tonnes.
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