Although the rate of customs duty has been reduced by 10% there is likely to be no significant impact on the industry. This is largely because requisite infrastructure to import cement does not exist in the country. In the near to medium term this development is likely to have no impact.

The Gujarat earthquake is likely to trigger large-scale construction activity. The exemption from excise duty for cement procured for reconstruction purposes will only help lift demand as cement becomes more affordable.

The decision to step up spending on roads will benefit the cement sector in terms of higher growth in demand. Moreover, with almost all contracts for the golden quadrangle to be awarded by June 2001, cement companies can look forward to higher demand in coming months.

The reduction in the dividend tax will benefit companies, as the tax outgo will reduce. This will add to cash flows, or alternatively, could result in higher dividend payouts.

The reduction in the surcharge on corporate tax will benefit companies as it would have the effect of reducing their tax outgo.

Need to boost demand for optimum utilization of economic resources. The government should earmark US$ 10 bn per year over the next five years for mass housing, cement concrete roads and canal lining of irrigation systems.

Renewed thrust on housing – Restrictions on land availability should be removed. On the tax front, stamp duties should be rationalized to a uniform level and complete tax write off on one house per family should be provided. Industry status should be given to urban infrastructure.

Proactive measures required to check import of cement. Import duties should be increased to 50% (excluding CVD and SAD).

CMA has also proposed that the government take measures to improve infrastructure for handling bulk cement exports.

The government has belatedly realised that giving sops to the housing sector can indeed have a multiplier effect. In the last two budgets, measures to make housing more affordable (by offering tax breaks) have been introduced. Given that there is a large shortage of housing, demand from this sector will continue to grow robustly.

The prospects of higher demand for cement from the infrastructure sector seem as distant as it did a few years ago. The government’s track record has been very poor and it cannot be said with surety that construction activity (say in the road sector) will finally take off.

Another area that has witnessed considerable activity in the past few months has been the infrastructure sector, and in particular the road sector (total spending estimated at US$ 200 bn over the next five years). The dismal state of infrastructure in the country necessitates that large scale construction activity be undertaken in the next few years. This in itself will unlock large demand for the commodity.

Although the sector has seen some consolidation activity, the degree of fragmentation continues to be high. This has continued to cast a shadow over the sector, as companies looking at gaining market share dash hopes of better realisations.

Over the last one year there has been a considerable pick up in consolidation activity. This will bode well for the sector, which has been witnessing pressure on realisations even in the wake of higher demand. This is largely due to intense competition prevailing in the sector.

After a rapid ramp up in cement capacity, new additions finally seem to be slowing down. This coupled with the rise in demand for cement (anticipated to be approximately 8% over the next few years) will accord higher pricing power to the companies.