Mar 01, 2013, 07.28 PM | Source: Moneycontrol.com
According to India Ratings, the proposed 5.79% increase in rail freight as per the Railway Budget 2013-2014 may negatively impact the margins of the cement industry.
, India Ratings |
The cement manufacturers of South India will be particularly affected, given the unfavorable demand-supply situation may not be in a position to pass on the increased cost. However, cement players based in the rest of India would be able to pass on a significant portion of the cost increase.
The railway freight hike may potentially increase the cement price by INR2 to INR4 per bag.
Around 50%-60% of the freight expense of a typical cement company is related rail freight. This is essentially 15%-18% of total costs. Around 10.5%-11.0% of rail freight (by volume) is attributable to the cement industry. This is second only to coal which accounts for 45%-47% of the rail freight.
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