Demands not met, but no worries

Demands not met, but no worries
Published: 01 March 2005

The Indian cement industry expected a lot from this budget. But it has to be content with the fact that the continued focus on infrastructure development in the budget, if translated into action, should boost demand. The industry which had grown at a CAGR of 8% in the last 15 years registered a lower growth of 5.50% last year. Greater thrust on infrastructure and more importantly, newer options such as the proposed special purpose vehicle (SPV) to fund roads, ports, airports, tourism, etc should help the industry see higher offtake. The Bharat Nirman package should see considerable investment going into roads, irrigation, water lines, housing, etc. The decision to retain the tax benefits on interest on housing loans will help the industry in a big way as nearly 60% of the cement consumption is from the housing sector. But then cement industry was hoping for a reduction in duties and levies which, according to the Cement Manufacturers’ Association, constitutes over 80% of the ex-factory price. 

 It wanted the excise duty to be reduced from Rs 408 per tonne to Rs 250 per tonne. It had also sought a lowering of royalty on limestone. Its demand for reduction in import duty of pet coke, an alternate for coal, to 5% was partly satisfied with the reduction in peak customs duty. It will now be 15% instead of 20%. "There has not been any change in the raw material costs for cement industry. At the same time, the continued focus on infrastructure will support growth in cement industry. But the important thing, as the FM himself puts it, is that the announcements should be translated into action." said AK Jain, ED - marketing, ACC. DD Rathi, whole-time director & CFO, Grasim Industries, said, "Broadly, the budget will not have any negative impact on the cement industry. The increase in excise duty on clinker will not impact much as buyers will get a set-off on the duty paid on clinker. But cement, which is a growing and capital-intensive industry, expected tax relief, including that in excise. We did not receive any. The reduction in deduction for depreciation available has removed a major incentive for the industry."