Cement producers operating clinker facilities in Tamil Nadu are set to face pressure on profitability due to the state's decision to impose a new levy on limestone, which will increase costs for this key raw material. The most impacted companies are likely to be those with a significant portion of clinker capacity in the state, unless they are able to pass on the higher costs to consumers through price hikes. Larger producers with smaller exposure in Tamil Nadu will face a minor impact.

The Tamil Nadu Mineral Bearing Land Tax Act, 2024, imposes a levy of ?160 per tonne on limestone. Limestone accounts for nearly two-thirds of raw material costs and about 5% of operating costs for cement makers. While some companies have more than half of their clinker capacity in Tamil Nadu, others have only a small fraction.

Analysts noted that the southern region is facing multiple headwinds over the past year, including multi-year-low cement prices, weak government spending, and higher competitive intensity. Prices are expected to remain under pressure going forward. In recent months, market leaders have acquired four South-based cement makers, with 44 million tonnes of capacity moving to large players.

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