The cement industry expects the Government to increase investment in infrastructure and housing projects to boost consumption.
Higher allocation of funds towards rural and social infrastructure projects will also help revive demand, which has to some extent been impacted by the demonetisation.
Investments already committed in the ongoing infrastructure and institutional housing projects are not impacted much. Halting projects where half the investment is committed will lead to cost overrun and the interest outgo will start pinching.
The launch of new housing projects has been somewhat delayed. The interest rate subvention of four per cent on housing loans up to ₹9 lakh and three per cent interest relief on loans up to ₹12 lakh should help home buyers. However, in tier-II cities individuals are still cautious on spending in housing projects partly in response to the impact of government’s digitisation initiatives. The rationalisation of freight charges by the Railways would help the industry bring down cost.
Despite being a key raw material for infrastructure projects, the duty on cement is among the highest at 28 per cent. However, with the GST round the corner we hope there is some relief in excise duty or some offset mechanism. The roll out of the much-awaited GST should be a major milestone in ease of doing business. The rate at which the cement sector will be taxed in GST regime will be key to ascertain whether there is some relief for this sector. The government should increase allocation for infrastructure in the Budget.
Banks lending rates are already on downward trajectory and expected to come down further. Any reduction in lending rate will boost sentiment and help home buyers. It will revive investments in the housing sector and increase cement demand.
Thrust on housingThe Modi Government’s thrust on housing for low income group may find higher allocation and increase cement demand as it rolls out. With the Government’s stress on agriculture, any incremental allocation for irrigation projects should benefit the cement sector.
(The writer is Whole-time Director and CFO, UltraTech Cement)