Cement: Inflationary impacts

Amandeep Gupta, Group Executive Director and Joint CEO, Dalmia Cement

The last year and a half has seen high interest rates which have contributed to a subdued growth sentiment. For inclusive growth, it is vital that a correction in the interest rates is actioned so that industry can start investing again which will lead to the initiation of confidence building mea­sures within the infrastructure industry. The Prime Minister has led the way discussing with industry stakeholders and officials from the power sector to address the issues concerned with infrastructure industry. Policy roadblocks pertaining to coal allo­cation, proposed MMRD Act and Land Acquisition Bill are also constraining industry’s growth to a great extent. These need to be streamlined. Ambiguity in these three areas needs to be dealt with at an early stage for the industry to gain confidence for future investments.

Inflationary pressure: Profitability of the infrastructure industry is under tremendous pressure due to the sluggish business environment and inflating Indian economy. The current situation is that of low demand, low capacity utilisation and slow completion of projects.

The industry has been sensitive to inflationary pressures and has so far desisted passing higher input costs to consumers. However, the recent revision of coal prices (slated to increase by 20 per cent to 30 per cent) has contributed significantly to the cement price hike. Further contributing to the rising cement prices, diesel and transportation costs have also gone up between 10-20 per cent in last one year. In this scenario, stakeholders are very apprehensive when it comes to flowing funds back in the industry.

Revising the higher interest rates, rationalisation of all the imposed taxes including excise and sales tax and a pragmatic approach with confidence building measures will help in catalysing the growth of the infrastructure industry.