The Hindu Business Line : Cement industry hails move, but asks for more steps

Mumbai, Jan. 2 The cement industry on Friday welcomed the second stimulus package, though it felt that the Government could have offered a better deal for the sector.

In a bid to boost the sagging economy, the Government eased the fund flow for the infrastructure projects. India Infrastructure Finance Company (IIFCL) will be raising Rs 10,000 crore through tax-free bonds for refinancing bank lending of longer maturity to eligible infrastructure bid-based public-private partnership projects.

Taking a cue from the Government, the Reserve Bank of India cut the cash reserve ratio (a portion of the deposit to be parked with the RBI) by 50 basis points to 5 per cent and reduced repo rates (the rate at which RBI lends to bank) and reverse repo (the rate at which RBI borrows from banks) by 100 basis points each to 5.5 per cent and 4 per cent, respectively.

Mr A.L. Kapoor, Managing Director, Ambuja Cement, said “Boosting infrastructure activities will have a marginal impact as these projects account for just 25-30 per cent of the total demand.”

However, the possible cut in lending rates by banks may revive some of the abandoned housing projects thus improving demand for cement, he added.

On the RBI measures, Mr Vinod Juneja, Managing Director, Binani Cement, said, “I think there is still room for reducing CRR by 100 basis points and repo and reverse repo by another 50 basis points.”

The Government has withdrawn special countervailing duty on cement. Importers have to now pay an excise duty of Rs 30 a tonne, just like the domestic manufacturers, said Mr K.C. Birla, Chief Financial Officer, UltraTech Cement.

“The Government would have done more good for the cement industry if it had levied a 10 per cent customs duty. While cement can be imported duty free, there is a 5 per cent import duty on coal, which is a raw material for making cement,” said Mr Kapoor.

“The small dose of stimulus packages will not be of much help to the industry particularly when additional capacity is being built across the country,” said Mr Juneja.

Commenting on the impact of the package on cement prices, Mr Birla said “Prices are determined by the market forces based on supply and demand.”

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