Coal news and updates

Cement body seeks import duty for level playing field

April 13: The Cement Manufacturers Association (CMA) has urged the government to levy a duty on the import of cement in order to provide a level playing field to the industry.

In a presentation to various ministries on April 10, the CMA said that cement is allowed to be imported into India at nil import duty whereas all the major inputs required for manufacturing cement -- such as limestone, gypsum, pet coke, packing bags etc -- attract duty.

“To provide a level playing field, the basic customs duty should be levied on imports of cement into India and import duties on goods required for the manufacture of cement be abolished and freely allowed without levy of duty,” the association said.

The association also feels there is a case for rationalisation of domestic taxes on the cement sector in order to make it competitive.

“The value-added tax (VAT) on steel is only 4% whereas it is 12.5% to 15% on cement and clinker in different states and thus there is a need to slash the tax burden by 20-25% through rationalisation and lowering of the excise duty to 6-8% without addition of any specific duty,” feels the association.

The CMA has also demanded that cement be stipulated as “declared goods” to put it on equal footing with goods like coal and steel and an element of royalty be included in the calculation of drawback rates.

The industry has also suggested that Section 12A of the Transfer of Mineral Concessions be suitably amended to allow transfer of mining lease/prospecting license in case of mergers and acquisitions of linked end-use plant.

It pointed out that Section 12A, at present, allows the transfer of mineral concessions only in the case of those which have been granted through auction and does not provide for transfer of mines lease prior to the new amendment along with the business through merger/demerger under the scheme of arrangement as provided for in the Companies Act, 2013 for which an order has been also passed by the respective high court.

Another problem affecting a number of cement companies in India is the recent de-allocation of coal blocks, the association said.

It said cement companies, despite having linkages, could not sign fuel supply agreements (FSA) due to the allocation of coal blocks to them. Subsequently, their coal blocks got cancelled and now these plants neither have a coal block nor coal linkages despite their plants being in operation.

“In view of such a situation, FSAs should be signed on a priority basis and tapering linkages should be restored to normal linkages,” the presentation by the association said.

Meanwhile, Secretary (Coal) Anil Swarup has said that the companies which lost their blocks will have to participate in the e-auctions of blocks in order to stand a chance of getting linkages.

Commenting on the coal ministry’s plans to auction existing linkages, the CMA presentation said the auction of linkages -- with one supplier monopolising coal production with many consumers --will not lead to true discovery of market prices and hence it should be avoided.

The CMA also submitted that despite being the third-largest freight customer and revenue contributor to Railways, the industry has been grappling with the absence of even basic infrastructure facilities at terminals.

“There is always non-availability of wagons, particularly during peak time, and more than 700 allotted arrear rakes (27 lakh tons) from South Eastern Coalfields Ltd (SECL) under South East Coast Railways (SEC) for the non-power sector were not materialised as on March 31, 2015,” the CMA said, adding there is huge backlog of rakes at SCCL.

“Frequent policy changes have had an adverse impact on transportation costs and, in the last four-and-a-half years, rail freight has gone up by 67%. This resulted in a situation wherein the end cost to the consumer in road transport is now considerably cheaper than rail transport even up to 500 km,” it said.

Because of all the above factors, the share of railways for the cement industry has come down to 34% at present from a high 50% a few years back, it stressed.

The association pointed out that the industry has grown at a rapid pace in recent years and about 50% of the Indian cement capacity is less than 10 years old. The industry uses a huge amount of fly ash and thereby helps in mitigating environmental hazards. Considering this important role, the CMA said, the government should expedite the process for issuance of BIS amendment on addition of fly ash from the present limit of 35% to 45% at Puzzolana Portland Cement (PPC).

In order to boost fly ash utilisation in the country, free-of-cost fly ash should be provided to cement plants and transportation costs should be shared by thermal power plants, it said.

“This will not only help in creation of a fly ash-free India, but will also help in the reduction of the overall carbon footprint in India,” the association said.