No fall in cement prices after GST 2.0 became effective
What's the story
A recent industry report by Yes Securities has accused cement companies of trying to pocket the Goods and Services Tax (GST) benefits that were supposed to be passed on to consumers. The observation comes after the Indian government slashed GST on cement from 28% to 18% on September 22. The move was expected to bring down prices significantly at the consumer level, but that hasn't happened yet.
Price impact
Manufacturers have retained most of the benefit
The Yes Securities report highlights that post the GST cut, all-India average cement prices fell by a mere ₹5 per bag on both month-on-month and quarter-on-quarter basis. This minor adjustment indicates a limited pass-through of the tax benefit to consumers. It appears manufacturers have retained most of this benefit in order to protect their margins amid monsoon-related disruptions and weak demand conditions.
Pre-GST hike
Price hikes before GST cut
Before the GST rate cut on cement, companies had attempted a price hike between late August and early September. Some regions managed to raise prices by ₹10-15 per bag in the last week of August. However, Hyderabad was an exception where prices surged by ₹30 per bag in the first week of September. Overall, from September 1-21, some eastern and western states saw an effective price increase of ₹10 per bag.
Market prediction
No price hikes expected in next 2 months
The Yes Securities report also predicts no price hikes in the next two months. However, it does suggest that companies could try to raise prices after Diwali. On a quarter-on-quarter basis, all-India average prices fell by 1.3%, with the southern region witnessing a major drop of 2%. The western, eastern and central regions followed suit with declines of 1.5%, 1.3% and 1.2% respectively while the northern region remained stable.