CEMENT prices have risen by about 5% in recent days in the northern, eastern and central regions, and fallen by a similar level in the South and the West the first time there has been a divergence in price movements this year.
The atypical behaviour is being attributed to taxes and higher fuel costs. Also, good demand is pushing up prices in some parts of the country, while excess capacity and on¬set of the monsoon are dragging down prices in the southern and western regions.
Retail prices of cement have fallen to Rs 250 per 50 kg bag in Mumbai, Gujarat and South
India, and increased to Rs 245 in the northern and eastern markets, cement company executives and dealers said. Dealers expect demand to slacken after August, which could lead to a further price correction.
Shree Cement managing director and president of the Cement Manufacturers' Association HM Bangur told ET that introduction of service tax on railway freight has raised the delivered cost of cement.
JK Lakshmi Cement whole time director Shailendra Chouksey said that prices have risen by Rs 5 per bag in Rajasthan as a result of the hike in value added tax rates. The recent increase in diesel prices has also contributed to the price hike, he added.
"Companies are just passing on the increased cost to consumers," he observed. In the north and the east, government projects have worked well thus boosting demand even during the monsoon, said an analyst with domestic brokerage firm.
Cement prices, which last came down in March following a 2% cut in excise duties, started rising from April.
According to the Cement Manufacturers' Association, 110 million tonne of capacity will be added at an investment of about Rs 50,000 crore in the next three years. The key drivers for cement demand are the real estate sector, infrastructure projects and industrial expansion projects. India has more than 70 cement companies and a total installed capacity of 220 million tonne.