New Delhi: Cement prices may go up by Rs 2-4 per bag of 50 kg as a fall out of the proposed hike in freight charges by the Railways, a ratings agency said Wednesday.
"The railway freight hike may potentially increase the cement price by Rs 2 to Rs 4 per bag," India Ratings said commenting on the proposal.
Railway Minister Pawan Kumar Bansal in his maiden Budget yesterday proposed nearly 6 percent hike in freight rates across the board.
India Ratings, which is a Fitch Group company said however that cement makers of South India may not be in a position to pass on the increased cost due to the unfavourable demand-supply situation in region.
"However, cement players based in the rest of India would be able to pass on a significant portion of the cost increase," it said.
The proposed hike in freight charges may also negatively impact the margins of the cement industry. In the event cement manufacturers are unable to pass on the hike, their operating margins may reduce by 75 bps - 100 bps.
Commenting on proposed hike in freight rates, Shree Cement's Managing Director H M Bangur had said that as a result of the hike, each million tonne of cement production will go up by Rs 13-15 crore.
India Ratings said around 50-60 percent of the freight expense of a typical cement company is related rail freight.
"This is essentially 15-18 percent of total costs," it said.