Union Budget 2023, which brought a mixed package for industrial India, has spelled out a positive narrative for the cement sector. ICR brings you a detailed report.

If one were to summarise the Union Budget 2023 in bulleted points, the following keywords would be highlighted:

1. Pre-election year budget
2. Inclusive development
3. Infrastructure and investment
4. Youth power
5. Skill development
6. Green growth for sustainable development
7. Boosting start-up growth

And amongst these the most important ones for the cement sector are infrastructure and investment. With the government raising capital expenditure by 33 per cent to Rs 10 lakh crore, it is a clear signal for steel and cement consumption to skyrocket in the next fiscal. As soon as the honourable Finance Minister Nirmala Sitharaman announced a 33 percent increase in capital investment, shares of steel and cement companies took a hike. As the budget allocates a capital expenditure of 3.3 per cent of GDP, it is almost three times the outlay in 2019-20. The Union Budget 2023-24 has definitely infused the market with optimism.
Similarly, there has been an outlay of Rs 2.4 lakh crore for railways and 50 new airports and 100 critical transport infrastructure projects for last and first-mile connectivity for sectors such as coal, steel, food grain, fertiliser and ports.
And most importantly, the PM Awaas Yojana (PMAY) has received an enhanced 66 per cent to over Rs 79,000 crore. With its focus on ‘housing for all,’ the plan for affordable housing will give the real estate sector a much-needed impetus, thereby boosting the demand for cement, too.
Speaking about the budget, Vishal Kanodia, Managing Director, Kanodia Group, said, “The budget 2023-24 presented by Hon’ble Finance Minister Nirmla Sitarman under the able guidance of Hon’ble Prime Minister Shri Narenda Modi is balance and optimistic to attain ‘Sabka Saath Sabka Vikas’ – inclusive development of the country to place the country developed country segment by 2047. Creating urban infrastructure in tier 2 and 3 cities via establishment of Urban Infrastructure Development Fund, Jal Jeevan Mission, Pradhan Mantri Awas Yojana, North East Special Development Scheme. Establishment of 157 Nos Nursing College, Eklavya Model Residential Schools, etc.”
“Outlay on above projects definitely boost the demand of cement and construction materials and create more job opportunities. In addition to the above, the budget also provides tax relief to individual taxpayers and the corporate world, which will also provide major stimulants to demand generation and saving. Overall the budget is very good and it will be a positive stimulant for the construction sector, which was under pressure in the last 2-3 years due to Covid -19 pandemic.”
Sandeep Runwal, President, NAREDCO Maharashtra, said, “Pradhan Mantri Awaas Yojana (PMAY) is a lofty initiative by the central government, aiming to bring affordable housing for all. The staggering 66 per cent increase in funding for the scheme to Rs 79,000 crore for the next fiscal year is expected to address more than 55 per cent of the estimated deficit in funds for projects under the scheme, providing a huge impetus in providing housing to those in need.”
Srini Srinivasan, MD, Kotak Investment Advisors, commented, “We were expecting a more populous budget with taxes going up, but that did not happen. The cap of Rs 10 crore on the capital gains deduction will impact the luxury housing segment, mainly in Mumbai. There will be bunching of sales till 31st March 2023. Additional tax on REITS was a dampener but overall the budget on housing was a good one.”
Rajiv Sabharwal, MD & CEO, Tata Capital, lauded the Finance Minister’s efforts to balance both the short and long-term growth measures. He maintained that though the budget has not proposed any new proposal for the real estate industry, it has not dented the ongoing pace of growth, as the real sector had caught a good momentum due to the government’s push for the past two years.

Power Play
Power has been under the spotlight in this budget. As the thermal power sector suffered due to coal shortage and challenges pertaining to working capital, it had an adverse impact on the cement sector. The demand for power continues to be robust and is likely to sustain even as the economy recovers.
However, with regards to the cement sector, it is renewable energy that is on the radar. India’s goal of net-zero carbon emissions by 2070 was reiterated in the budget presentation and pathways for green growth were envisaged. One of them being the National Green Hydrogen Mission, with an outlay of Rs 19,700 crore, with which India aspires to accomplish annual green hydrogen production of 5 MMT by 2030. This will have a direct impact on installation of more renewable energy and reduce the carbon footprint for the hard-to-abate sectors like cement, steel, shipping etc.
“Union Budget 2023 focuses on continuing the momentum towards a sustainable India. By earmarking green growth as one of the 7 key priorities, the government has reaffirmed its commitment to decarbonisation and creation of green jobs. The allocation of Rs. 35,000 crore for priority capital investment towards energy transition will help catalyse our Net Zero journey. Viability Gap Funding for battery storage projects, significant outlay for grid expansion for renewable energy and the green credit programme to incentivise sustainable behaviour are all very welcome and timely steps that will accelerate clean energy adoption,” said Rahul Munjal, Chairman and Managing Director, Hero Future Energies.
Overall, Budget 2023-24 brings positive news for the cement sector. It is now for the industry leaders to make the most of it and implement strategies to maximise the growth and fulfil the ever-increasing demand.