Pet coke import duty hike may hit cement cos operating margins

Pet coke import duty hike may hit cement cos operating margins

NEW DELHI: Cement companies operating profits may fall by one percent following the government’s decision to hike import duty on pet coke to 10 percent from the current 2.5 percent, a report said.
“The operating margins of cement companies, which use high proportion of pet coke are likely to be affected following the government’s decision to increase the import duty on pet coke to 10 percent from the present 2.5 percent. The operating margins of cement manufacturers may fall by about 1 percent, if increased cost is not passed on to end users,” India Ratings said in its report here.
The increase in import duty was announced after the Supreme Court decided to lift the ban on the use of pet coke last week. The Supreme Court allowed the cement industry to use petcoke as a feedstock which had been banned last month to clean up the air pollution. While, issuing the exemption order for cement units, the apex court asked the government to frame guidelines for the use of petcoke.
Ind-Ra said that the cement manufacturers may resort to coal imports due to low domestic availability. Cement manufacturers prefer using pet coke, as it contains high calorific value (7,500-8,500Kcal/kg), to non-coking coal (2,200-7,000Kcal/kg). Total pet coke consumption in India increased by 34 percent in October 2017 to 2 million metric tonnes as compared with the level recorded for October 2015. Of the total pet coke consumed in India during FY17-1HFY18, about 50 percent was sourced domestically and the remaining through imports.
According to Ind-Ra’s assessment, 35 percent of the total pet coke imports were consumed by the cement industry.