The Namo 2.0 government’s maiden budget, Union Budget 2019-20’s thrust to infrastructure building across several sectors and rural and urban affordable housing, augurs well for the cement and building materials industry in terms of demand. The first woman Union Finance Minister Nirmala Sitharaman has chosen to boost credit flow in the economy as a pill for the otherwise sputtering economy, besides hiking subsidies available to home buyers, which together are expected to stimulate credit flow to the cement consuming sectors like real estate, housing and infrastructure too, thus proving the budget a ‘overall positive’ for the cement sector.
However, the government has failed to dispel the existing apprehensions that though the government has drafted well-meaning several policies in its earlier stint, many of them remained on paper even today. Make in India, Stand up India, Start-up India etc avowed schemes of the earstwhile Modi government which failed to take off. Many trade bodies have advised the government to lay a clear roadmap for achieving tangible results for each of these policies before crafting new ones. However, the current budget which presents long term vision without specifying short term implementation roadmap, shows that the government has decided to ignore these suggestions.
Speaking to media after the presentation of the budget, Mahendra Singhi, President, Cement Manufacturers Association (CMA), said, “The cement industry extends its full support in realising economic reforms through rapid growth in infrastructure across housing, rail, road, waterways and highways. The Cement Industry finds the Government’s idea of prioritising waste to energy and enabling entrepreneurship among farmers, through harvesting bioenergy are very encouraging.”
Rs 100-lakh-cr infra thrust
“The budgetary allocation of Rs 100 lakh crore for infrastructure development over the next five years clearly reiterates the government's vision towards nation building. We expect to see a significant increase in cement consumption on account of schemes like the Pradhan Mantri Gram Sadak Yojaya Phase III, which envisions the construction of 1,25,000 kms of roads. Being a labour intensive industry, the government's move to streamline labour laws will also act as a huge boost stimulating employment in the cement industry,” said Jayakumar Krishnaswamy, CEO, Nuvoco Vistas Corp Ltd.
Krishnaswamy has also welcomed the government's decision to fully automate the GST refund module, which helps doing away with maintaining multiple ledgers.
While terming the budget’s impact on cement industry as ‘neutral’, Madan Sabnavis, Chief Economist of CARE Ratings said that the increased allocations towards Pradhan Mantri Gram Sadak Yojna (PMAY) at Rs 19000 crore, AMRUT and Smart Cities Mission at Rs 13,750 crore, and allocation to PMAY, though reduced marginally, to Rs 25,853 crore would increase demand for cement. To boost housing demand, the budget has increased the interest deduction limit by Rs 1,50,000 to Rs 3,50,000 for self occupied properties on loans borrowed up to March 31, 2020 and purchase value of up to Rs 45 lakh.
“With the Government continuing to focus on rural development, affordable housing and infrastructure development, we expect the current consumption growth to continue for the sector and the capacity utilisation to sustain in FY20,” Sabnavis exuded hope. The second phase of PMAY (Gramin) aims to achieve construction of 19.5 million houses by 2022.
Besides urban and rural housing, and rural roads schemes, the budget announced infrastructure schemes in several sectors like roads, airways, urban mobility, waterways, railways infrastructure etc. The budget announced the government’s intent to adopt congenial and suitable policies for development of Maintenance, Repair and Overhaul (MRO) segment of aviation industry, and new metro routes for a total length of 300 km which have been approved in the previous year. Currently, 657 kms of metro rail network is in operation across India.
The government had recently integrated the Ministry of Water Resources, River Development and Ganga Rejuvenation and Ministry of Drinking Water and Sanitation, to bring all the related ministries under the oversight of one ministry. The ministry will also ensure piped water supply to all rural households by 2024 under Jal Jeevan Mission and also develop inland waterways.
The budget envisages mobilising Rs 50 lakh crore investment for railway infrastructure development under Public Private Partnership (PPP) by 2030. The total allocation made to the Ministry of Roads and Highways has been increased to Rs 83,016 crore, besides an additional allocation of Rs 19,000 crore towards PMGSY (Rural Roads) is a sizable increase of over 18 per cent over Rs 15,500 crore made in the previous year’s budget. “Given thrust to road development through Bharatmala and large funding requirement of NHAI, allocation to the sector is below expectations though increased by only 5.6 per cent over previous year’s budget,” says Sabnavis.
“The cement industry extends its full support in realising economic reforms proposed in the budget.” -Mahendra Singhi, President, CMA
We expect to see a significant increase in cement consumption on account of budgeted schemes. - Jayakumar Krishnaswamy, CEO, Nuvoco