Cement Prices Are Likely To Increase Because Of New Mineral Tax By States: Report

Mineral Tax

Cement prices across various states are expected to increase following a Supreme Court ruling that permits state governments to levy additional taxes on mineral rights and mineral-bearing lands.

According to a JM Financial report, the move could significantly impact cement manufacturers, leading to price hikes in response to higher production costs.

Impact Of Supreme Court Ruling

In July 2024, the Supreme Court’s ruling authorized states to impose taxes on mineral rights in addition to existing royalties. Following this decision, Tamil Nadu introduced the Tamil Nadu Mineral Bearing Land Tax Act, 2024. This new legislation imposes an additional Rs 160 per tonne tax on limestone mining, which will come into effect on February 20, 2025.

Limestone is a crucial raw material in cement production, and the tax will likely raise manufacturing costs for cement producers in Tamil Nadu. As a result, cement companies in the state are expected to increase prices by Rs 8-10 per bag to offset the additional costs.

Ripple Effect On Cement Prices In Other States

While the new tax will primarily affect cement manufacturers in Tamil Nadu, other mineral-rich states like Karnataka are already considering similar measures. If more states follow Tamil Nadu’s lead and impose similar mineral taxes, cement prices across India could experience a widespread increase.

Cement manufacturers in these states will likely face rising costs of production, especially since limestone is a key ingredient in cement. As competition in the cement market has already been intense in Tamil Nadu, companies may have limited options but to pass the added cost onto consumers through price hikes.

Potential Broader Impact On the Construction Sector

The introduction of new mineral taxes could also have significant implications for the broader construction and real estate sectors. Cement is a core material used in construction, and any price increase could raise overall project costs, potentially affecting the affordability of housing and infrastructure projects.

Industry experts predict that cement companies will adopt a gradual approach to price hikes to avoid shocking the market. However, with input costs on the rise, pricing strategies will be crucial for manufacturers in the coming months. Analysts will closely monitor how these adjustments unfold and whether the new tax policies influence the construction landscape beyond Tamil Nadu.

Conclusion

As the cement industry faces rising input costs due to new mineral taxes, price increases seem inevitable in the near future. The situation will likely evolve as other states consider similar tax measures, and the broader economic impact on construction and real estate will be a key area to watch in the months ahead.