CHENNAI: The construction industry, which is struggling to shrug off the pandemic-induced woes, has suffered a fresh blow with cement manufacturers in South India warning that the production cost of cement is likely to go up by Rs 60 for a 50kg bag.
The South India Cement Manufacturers Association (SICMA) said cement production has been hit due to rise in the cost of imported coal. “Pet coke is simply not available. These days, due to shortage of ships, even high-priced coal or pet coke is not available and sources say there will be further increase in the price of coal,” a SICMA statement said. “Under these circumstances, it is likely that cement production will be badly hit. This could increase the production cost of a bag of cement by a minimum of Rs 60. It is difficult to predict either further increase in fuel cost or capacity utilisation can be achieved by the cement industry in south India,” it added.
Branded cement was selling at Rs 420 per bag till last Saturday. At present, the wholesale price of ‘A’ grade cement has already risen to Rs 480-490 while the retail price is Rs 490-500. This has sparked alarm among property developers, who feel it could impact the residential sector badly. Builders estimate that real estate prices could rise by Rs 250 to Rs 500 per square feet.
With over 180 million tonnes capacity, South India accounts for around half of the country’s installed capacity. About 35 per cent of limestone deposits are in the South and it can be a cement hub to meet the surge in the demand in other regions.
Construction sector wants govt to intervene and regulate cement prices
Acco rding to industry sources, the cement industry has been facing restrictions in the domestic supply and distribution of good quality coal. This has forced the industry to rely on imported coal from the United States and Australia and also on the import of the coal substitute, pet coke. I n recent times, there has been an unprecedented increase in the cost of these fuels from $90 per tonne to $170 per tonne.
The Rs 400 cess per tonne levied on imported coal and 11 per cent additional duty on imported pet coke have added to the cost. The industry wanted the government to consider rollback of these levies at least till the time imported costs came down to a reasonable level of less than $100 per tonne. But the China coal crisis has added fuel to the fire, with even shortage of ships and coal availability, said industry sources.
Developers are not buying the argument. S Sridharan, chairman, Urban Development/ Affordable Housing Committee, Confederation of Real Estate Developers' Associations of India (Credai) National, said the rise in cement prices will bring the construction sector to a standstill and customers will be affected.
"We urge the government to intervene," he said. Srinivas Anikipatti, senior director — Tamil Nadu and Kerala, Knight Frank, said the rise in cement prices will result in the overall construction cost going up by 2.5 per cent.
"It will put a strain on cash flow and slow purchases as well as increase the price of unsold units," he said. The impact will be felt by the construction sector as the price of steel and cement has kept on increasing.