Coal news and updates

‘Infra focus, housing sops to benefit cement cos’

The government’s focus on infrastructure is evident with the total targeted spending in FY17 increasing 28% over FY16. This, along with a number of benefits provided on affordable housing, would aid recovery in cement demand, CRISIL Research said in its analysis of Budget 2016-17.

Further, the rise in duties and tariffs in the form of a clean cess on coal is expected to have a muted impact on total cost, which is expected to increase 0.2%, the report said.

Power and fuel cost (~25% of cost of sales) will increase 1%. However, amid rising demand, players will be able to offset this with a hike in prices, the report added.

Tax incentives for home buyers and developers are aimed at lifting housing demand. This will not only have a spillover effect on the cement and metal sectors, but is also a positive for job creation given the high labour intensity of the construction sector.

CRISIL Research said the deduction for interest enhanced for first-time home buyers to Rs 250,000 from Rs 200,000 per annum, 100% deduction for profits of companies undertaking specific housing projects (only for flats up to 30 sq m in 4 metro cities and 60 sq m in others) and service tax exemptions on construction of affordable houses (up to 60 sq m under any scheme of the central or state government), will also be a positive for the cement sector.

Further, investment towards national highways have been increased by 49% to Rs 1,032 billion (budgetary +internal and extra budgetary resources).

“Growth is gradually looking up, inflation is within the Reserve Bank of India’s comfort band and the current account deficit is firmly under control. De-bottlenecking steps by the government are improving ease of doing business, while declining inflation and lower interest rates are expected to support private consumption. Yet, India Inc remains cautious on fresh investments. A revival in investments hinges on increased public investments, especially in infrastructure – specifically roads, power transmission/distribution and railways – because spending on it has a significant multiplier effect of creating demand for steel, cement, capital goods and commercial vehicles, and spurring investments in the manufacturing space as well,” the research report said.