State-Imposed Mineral Taxes Threaten Cement Industry Stability

Cement prices in India are poised to rise following a Supreme Court decision allowing states to levy taxes on mineral rights. Tamil Nadu's new law imposes a tax on limestone, leading to inevitable price hikes from cement manufacturers. Similar measures are being considered by other states, potentially impacting national cement prices.

Cement prices across various Indian states are anticipated to surge, influenced by potential new mineral taxes imposed by state governments as per a Supreme Court judgement, according to a JM Financial report. The ruling, issued in July 2024, empowers states to impose taxes on mineral rights and lands, augmenting current royalty systems. Following this, Tamil Nadu enacted the Tamil Nadu Mineral Bearing Land Tax Act, 2024.

The legislation introduces an additional Rs160 per tonne tax on limestone mining effective from February 20, 2025. Similarly, Karnataka is evaluating comparable measures, prompting expectations of increased cement prices. Cement companies predict these new taxes will significantly impact their operations in Tamil Nadu, leading to necessary price adjustments to counterbalance rising expenses.

Consequently, consumers in Tamil Nadu might see cement prices hike by Rs8-10 per bag. Historically, the state's cement prices have struggled with competitive market pressures, but this new fiscal burden might compel companies to pass costs onto consumers. Experts suggest this could trigger other mineral-vibrant states to follow suit in implementing similar taxation policies.

The Karnataka government is reportedly deliberating on instituting a mineral tax, with other states possessing substantial limestone deposits likely to adopt comparable strategies. Should more states enact such levies, a widespread increase in cement prices across the country would follow. Cement firms may implement gradual price increases to mitigate market disruptions, as the industry navigates escalating input costs.

Analysts are keenly observing how cement manufacturers adapt their pricing strategies in response to these tax changes and the resulting influences on broader construction and real estate sectors in Tamil Nadu and potentially nationwide. (ANI)

(With inputs from agencies.)