Coal news and updates

The cement industry, which has been hit hard by demonetisation, is expecting an increased outlay for the infrastructure sector and a major thrust on housing in the upcoming Union Budget 2017. The government’s push to infrastructure, especially railways, roads and defence, is expected to continue in financial year 2017-18, according to a budget preview report by Goldman Sachs.

Given the note ban pain, relief on personal income tax rates and incentives for investment in housing are likely to boost demand, brokerage Nirmal Bang Institutional Equities said in a recent report. And while there may be no direct measures for the sector, it is expected to be an indirect beneficiary of increased government spending on infrastructure, it added.

The housing sector accounts for 67-70 percent of the cement demand, and a higher allocation to it in the budget is expected to benefit the industry, according to Angel Broking.

 

The government had announced a grand ‘Housing For All’ scheme in 2015. A review of the scheme, along with incentives to boost low-cost housing, is expected in Budget 2017. In addition, the government may also consider easing financing norms across the value chain of affordable housing, said Deutsche Bank’s budget preview report.

A report by Axis Capital expects the government to impose a Rs 400-per-tonne cess on ‘petroleum coke’, or pet coke, amid rising imports of the fuel. Over the last two years, the Centre has imposed Rs 300-a-tonne clean energy cess on coal, but spared pet coke.

If a similar green cess is levied on pet coke, it will be a tad negative for the sector. The cess will eat into the profitability of cement companies which have migrated to pet coke as it comprises nearly 60-70 percent of their power and fuel costs.

The excise duty structure for both cement as well as cement clinker has become complicated in the last few years, according to FICCI’s pre-budget memorandum for 2017-18.

Duty rates on cement – at 12.5 percent plus specific duty – are among the highest and next only to luxury goods such as cars. Any cut would lead to improvement in margins for cement players. The Nirmal Bang report, however, sees no relief.

Source:bloombergquint