Trade pundits and market analysts were expecting a ‘people pleasing’ budget from the honourable Finance Minister Nirmala Sitharaman. But we would all agree that in today’s post-pandemic economy that requires a herculean effort. Focussing on the basics of ‘roti, kapda aur makaan,’ Union Budget 2023-24 set out to appease industrialists, traders, farmers and the common man alike.
Housing for all has been our Prime Minister’s dream for long, and the PM Awaas Yojana (PMAY) yet again won the round with the allocation of an enhanced 66 per cent to over Rs 79,000 crore outlay in the current budget. This is without a doubt the stimulant that the construction industry needs to jettison itself out of the pandemic’s shadow. Infrastructure is the next big thing on the cards for GoI, which will translate into urban infrastructure, roadways, railways etc. Making true the maxim ‘all roads lead to Rome,’ the above cited allotments are pointing towards a robust growth in demand for cement.
The industry is expected to close FY23 with a production of 380-390 million tonnes, as per the report by CARE Advisory and Research, with a growth rate of 8-9 per cent year-on-year. In FY21, the production of cement was 296 million tonnes while in FY22, it was up by 20 per cent, at 356 million tonnes. However, does this upward trajectory of the growth reflect in the balance sheets of cement companies? Unfortunately not! The uptrend of consumption is not having the desired effect on the cement industry as its profitability is adversely affected by high power and fuel costs.
While the government is keen on developing the country and making ‘Amrit Kaal’ the next defining phase for it, all development comes at a cost. In this scenario, the cost has to be borne by the cement sector that is struggling to maintain price brackets and profit margins. Increase in demand has to be equitably balanced with cement production as well as sourcing of energy and raw materials. Sustainability of processes, raw materials, waste management and automation are aspects that are likely to figure in the production planning for cement manufacturers.
Whether the Indian cement industry is up for this challenge is yet to be ascertained. There is a wide gap between the performances of the top five companies and the rest of local brands in terms of volume. There are multi-pronged challenges to be met, which makes one wonder if the provisions of the Budget 2023 would be enough to propel the sector forward.
So, yes, Budget 2023-24 is a promising one, but there are other powers at play for the cement industry that will determine its profitability and success in the coming fiscal.