The Hindu Business Line : Cement cos bet on infrastructure spend to drive demand

Mumbai, July 9 Cement companies may not have got any direct benefits from the Budget but are still content that incentives offered in the stimulus package during the slowdown have not been rolled back.

The industry had sought reduction of value-added tax from 12 to four per cent (at par with steel) and lower royalty on limestone from Rs 45 a tonne to Rs 16 in line with iron ore levels. The Government levies and taxes take up 60 per cent of cement’s ex-factory price.

Mr Sumit Banerjee, Managing Director, ACC, said though the sector did not get any respite from the high rate of taxes and duties, they are satisfied that the excise duty has not been revised back to 12 per cent from eight per cent charged now.

“In fact, the recent diesel price hike has further increased the burden on the cement sector. Similarly, we were hoping that retail housing would get a boost by way of an increase in personal income-tax exemption on housing loan interest but that has also not happened,” he added.

Service tax on rly freight

Ms Vinita Singhania, Vice-President, Cement Manufacturers Association and Managing Director, JK Lakshmi Cement, said the service tax on railway freight was a damper and would raise the delivered cost of many commodities, including cement.

The increased spending on infrastructure projects would also boost demand for cement, particularly when the industry has added 53 million tonnes capacity in the last two years. The capacity utilisation has fallen to 84 per cent in FY’09 from 94 per cent in FY’08 due to lack of corresponding pick-up in demand. The infrastructure sector accounts for almost 25 per cent of the total cement consumption in the country.

Mr Vinod Juneja, Managing Director, Binani Cement, said the demand for cement would increase with the boost in infrastructure projects and that additional capacities would be completely utilised.

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