While demand for cement was already down, manufacturers of the key building raw material in south India have now faced another big trouble of hike in diesel prices. Oil companies in India have raised the cost of diesel by Rs 10 a litre.
The hike in diesel price has increased cement production costs. The price rise can be traced back to the fact the government has recently removed controls on diesel prices, perhaps because of the Rs 96 000 crore oil subsidy bill that it must now pick up. The removal of the controls has seen the oil companies instantly beginning to raise diesel prices, and though the initial price rise isn’t large, there’s no telling whether it will continue upwards.
For the cement industry, this is just one of several issues it is currently facing. Power is in short supply, and this only deepens manufacturers’ dependence on diesel. Recent rail freight price hikes have also taken their toll, making the transportation of raw materials more expensive.