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Budget 2018: Will Arun Jaitley provide relief to cement industry given infra is govt’s focus?

The government has taken some great steps to boost investment in the infrastructure sector, including the announcement of marquee projects such as the and PM Awas Yojana. Hopefully, in Union Budget 2018, will provide further impetus on developing rural infrastructure.

Under the Bharatmala project, the biggest-ever highway development plan has already been approved by the government. We expect urban infrastructure, housing, water and sanitation needs to be discussed at the new Budget announcement.

In the recent past, the finance minister too has indicated that growth will be driven by public capex or public spend. It is widely expected that the two areas where the government will continue to drive – one would be affordable housing and the second is roads and infra. We believe that the government is extremely focused on improving infrastructure, especially in the rural regions.

There is no doubt that the path to economic growth will be paved with the investment in infrastructure. To what extent will Budget 2018-2019 reflect these concerns is the overwhelming question? Those in the infrastructure sector are certainly expecting the government to rise to the occasion.

Support from the government to the construction and infrastructure sector is also critical given that fact that the past year has seen some major policy interventions which had a short-term impact on the industry, first because of demonetisation, and later because of the introduction of the GST. These had a direct impact on the real estate and construction business. Besides this, the introduction of RERA has also impacted the construction sector.

A file image of Arun Jaitley. PTI.
A file image of Arun Jaitley. PTI.
The combination of these factors was a significant impediment to a turnaround in the housing sector, and despite the infrastructure projects launched by the government, growth in cement demand was at a low of about 2 percent.

Specific to cement industry, some sort of tax relief would be most welcome, given especially the fact that cement is among the highest taxed industries right now, at a slab of 28 percent. Being a core industry to boost the economy and infrastructure, the industry expects that the government will consider its legitimate demand of the need to bring down GST slab.

In the recent past, we have seen an unprecedented rise in fuel and power cost which forms a major chunk of our variable cost. As a consequence, the input costs have gone up significantly. Recently, the import duty on pet coke has been increased from 2.5 percent to 10 percent. To boost consumption it will be helpful if the input costs are kept in check.

Finally, on the housing and construction front, while a ton of schemes have been announced off-late, the actual on-ground execution will be a critical factor.

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