Railway Budget 2007: Impact on oil&gas, steel, cement

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Railway Budget 2007: Impact on oil&gas, steel, cement

Some of the Railway budget's proposals are likely to have an impact on sectors like oil&gas, steel and cement.

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Some of the Railway budget's proposals are likely to have an impact on sectors like oil&gas, steel and cement. 

Railway minister announced proposals like a freight rate cut on iron ore by 6% and on petrol and diesel by 5%.

Last year the Railway Budget had reduced the classification for diesel and petrol from class 240 to 220 thereby reducing the tariff by about 9%. Taking the rationalization process further, the Budget has proposed to reduce the highest class from 220 to 210.

The cut on petrol and diesel and iron ore will be beneficial for the oil marketing companies and steel stocks. This proposal will save Rs 35-40 cr in under recoveries for companies like IOC. It will also be beneficial for companies like BPCL,HPCL.

Steel company, Essar Steel , is likely to be impacted positively by this proposal and analysts expect their margins to improve considerably. The company is about to complete their capacity expansion to 4.6 million tonnes.

There has been no cut in freight rate on cement products. Any decrease in rate would have impacted the sector positively because nearly 40% of the transfer of goods of most cement companies is done through the rail route and therefore any reduction would have cut costs for them.

This news is likely to impact India Cement negatively. Any decrease in Freight rates would have been beneficial to the company. The company is the market leader with a market share of 19% in South India.

A discount of 40% on incremental bag loading( empty floor journey) will be marginally positive for cement companies.

The electric equipment company, Integra Hindustan , is likely to gain from more safety capex in Rail Budget. The budget has allocated Rs 17,000 crore as Special Railway Safety Fund.