New thrust on infrastructure to boost demand in cement sector

New thrust on infrastructure to boost demand in cement sector
Published: 09 July 2004

The Indian cement sector has largely been left unaffected by the current Budget. While the industry has welcomed the various initiatives undertaken on the infrastructure front, it feels that it could have done with a reduction on excise duties. "The Budget is sentimentally positive for the cement industry. There is a lot of thrust on infrastructure spending. Cement is a highly taxed industry and a reduction in excise duties would have helped," according to Grasim Industries CFO DD Rathi. Cement, currently, attracts an excise of Rs 400/t. The two per cent cess will increase this by about another Rs 8/t. An ACC official, the company with the country’s largest cement capacity, added that the Budget was positive for the sector though cement has not been directly affected.

Gujarat Ambuja executive director Anil Singhvi feels that the cement sector is going through a slow growth phase with the industry growing by just over five per cent during the last fiscal which was one of the slowest growth in the last several years. "In the current year, it’s even slower. Cement demand has grown by just two per cent during the first quarter. Cement industry needs larger focus on construction sector, growth of which is rather sluggish. Implementing the intent is the need of the hour," added Mr Singhvi. Industry observers feel that the issue here is not of intent but of implementation.

While the finance minister has taken initiatives to implement certain infrastructure schemes like housing, irrigation, development of airports, sea ports and augmenting power generation, the road sector is one area where there has been sluggish growth in last two years. India Cements managing director N Srinivasan feels that the cement industry will definitely benefit from the Budget. "With its focus on rural infrastructure, irrigation, food-for work programme, urban infrastructure like airports and above all the extension of concessions given to housing sector the demand for cement will go up significantly. The industry can also rest assured that, in normal circumstances an eight per cent GDP growth ensures a steady pick up in demand. We foresee the cement offtake to go up considerably in the coming months", he added.

Puneet Dalmia, vice-president, Dalmia Cement said: "We are very glad that support has been given to rural housing. This will have a positive trickle down effect on the cement sector. Propelled by this and other developments we expect the industry to grow by 7-8 per cent. However, the government could have brought down excise duty on cement as the sales tax and excise duty together account 40 per cent of ex-factory price, which is really high."