Better policy, not cost benefits, will revive firms

HM Bangur | Updated on July 02, 2014 Published on June 10, 2014


The cement industry has always been looking for cost benefits in the Budget. But this time around we want the Government to help boost demand through policy measures.

For instance, the Government can consider giving some incentives or laying emphasis on cemented roads for all highway projects. The lifespan of cemented roads are at least 50 per cent longer than that of tarred roads.

This will also reduce the maintenance cost in the long run. The previous Government had plans to go in for cement roads, but somehow, this wasn't implemented. This time around, the Government should set its vision right and ensure adequate investment flows into the sector to implement its plan.

Once the Government pronounces its policy statement, we expect demand to revive post-Budget and the investment cycle to turn for the better.

The positive sentiment in the capital market is expected to attract investment in various sectors. I expect more money to flow into the infrastructure sector, which has been neglected for quite some time now. The cement industry has added huge capacity in the last few years and is capable of meeting any pent up demand.

I do not think the Government is in a position to offer any incentives to us on the cost side. We definitely cannot expect the Government to roll back the diesel price hike. It may not happen. According to recent announcements, we understand that the Government has formulated a definitive plan to revive investment in the infrastructure sector.

Freight charges, however, are a cause for worry. We expect the new Union Railway Minister DV Sadananda Gowda to look at freight charges. The Railways recently hiked demurrage charges besides reducing the loading and unloading time. The industry has invested heavily in modernising the loading and unloading facilities. A failure to meet the time limit leads to stiff penalties and, therefore, an increase in cost.

The cement industry moves not only finished products from the factory but also sources various raw materials from different locations. Any hike by the Railways upsets this cost structure. We expect the Railways to rationalise its charges better.

(As told to Suresh P Iyengar.)

Published on June 10, 2014
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