Yet Another Googly!

Yet Another Googly!

The decision by the Railway Board to increase the Busy Season Surcharge (BSS) from 12 per cent to 15 per cent, effective from 1 October 2013, is yet another googly aimed at bulk commodity manufacturers like cement, which is already reeling under the pressure of dwindling demand and the spiralling cost of freight on the other.

The cost of freight has been rising due to the increase in oil prices, and when it comes to the last mile delivery, transportation costs by truck has also been on the rise; over a period of the last ten years , it has increased by nearly 50 per cent. In India, the transportation cost of cement is around Rs. 1.03 or Rs. 1.04 per tonne kilometre. The recent move to increase the BSS will have an additional impact on cement freight that is pegged at Rs 45 per tonne, and if one adds freight to coal movement, the impact could be as high as Rs 70 per tonne.

The move to hike the surcharge is detrimental to the cement industry which is already burdened with over capacity, to say the least; and it just does not augur well with the government´s ambitious plans to enhance the share of manufacturing in the GDP from the present 16 per cent to 25 per cent by 2022. Given the acute supply constraints of input materials and logistics support to the cement industry which keep getting worse every year, experts feel that unless and until government policies create a climate which results in a committed increase of the demand and clear- cut measures to ensure requisite supply of input materials and logistics support, as well as lowering the taxation burden on the industry, the ambitious plans will just remain just that!

There is an urgent need for setting up a regulatory mechanism to regulate and rationalise all rail matters including tariff and demurrages which will insulate users from any further arbitrary and frequent revision of the tariff by way of change in classifications by imposing surcharges and cess, etc.

It is high time that the government acted on the recommendation given by the Working Group on Cement Industry for the 12th Year Plan. There needs to be simpler, crystal clear and more transparent policies to avoid any chances of misinterpretation.

The need of the hour is to develop multi-modal transport systems- rail, road, coastal shipping and IWT- for movement of cement and clinker, as it is not possible for rail and road transport alone to cater to the steeply increasing transportation requirement of the industry. The concepts of Ro-Ro (Roll on - Roll off- wherein trucks are directly loaded on rail wagons and unloaded for last mile road transport at destination terminals ), road railers on the entire network, as also double stacking, would be a welcome step, provided all likely operational, technical and infrastructure problems are resolved and multi-modal transportation be made cost- effective.

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Indian Cement Review