|
Cement
Highlights
SED on white and special cements increased to 16%, leading
to a total excise duty of 32%.
Basic
customs on cement and clinker lowered from 35% to 25%.
Thrust
on infrastructure development, total outlay for building
roads up by 93% to Rs 8727 for 2001-02.
10 year
tax holiday for infrastructural projects. Enhanced concessions
granted for housing loans.
Nil
excise duty for cement supplies to Gujarat, likely to benefit
companies.
| Budget
Impact |
| Excise |
 |
Customs |
 |
Policy
Tax |
 |
The
Union Budget 2001-02 has continued with the infrastructure
and housing development schemes, which will act as the demand
drivers for the cement sector. Total outlay towards road
construction is around Rs.12,189 crore, including rural
and state roads. The budget has also raised the limit for
tax exemptions on housing loans from Rs.1 lakh to Rs.1.5
lakh. Gujarat reconstruction is likely to enhance cement
demand by 2-3 million tonnes over the next year. Sales to
the quake-hit state has been exempted from excise duties.
Companies having plants in Gujarat namely Gujarat Ambuja
and L&T are expected to benefit the most.
White
and other special cements will attract higher excise duty,
with increased SED. Lowering of customs duty on cement and
clinker by 10% is unlikely to have an adverse impact on
the sector, since there is hardly any import in the sector.
This step seems to be a move to pacify the builder community
that was protesting the recent hike in cement prices.
Increase
in freight rates, 3% on cement and 2% on coal, will have
only a marginal impact on the sector, causing cost to increase
by around Rs.0.5-0.65 per bag. A marginal reduction in coal
custom duty could benefit companies like Guajrat Ambuja.
Outlook
The sector has been marred by a glut situation due to over
capacities and two years of poor monsoons leading to severe
droughts in Q1 FY2001. Cement prices consequently touched
their five-year lows, despite increasing input prices in
H1 FY2001. As against a 15% demand growth in the previous
fiscal, demand grew by a mere 1-2% this fiscal. Growth has
averaged around 8-9% over a decade. Since December 2000,
prices skyrocketed across all regions, driven primarily
by an underlying understanding between players. Maintenance
of remunerative prices will determine the sector performance.
| Voices |
 I
think the budget is 'neutral'. The increased outlay
on infrastructure and thrust for housing development,
will benefit the sector. More could have been done on
these fronts. However, how and when demand will get
a fillip is the question.
Jayesh
Doshi, GM Treasury, Gujarat Ambuja Cements Ltd.
A
K Jain, Chairperson, Apex Committee, CMA says that
the budget is positive for the sector. Many demand
stimulating measures have been taken like higher outlay
for infrastructure including roads and concessions
for the housing sector. The lowering of customs duty
is in-consequential. There has been no import of cement
for last ten years. Cement prices in India are the
lowest in the world.
|
|
