Union Budget 2015: No sops for cement; excise, freight hike to bog sector down

Ritika Dangemoneycontrol.comIn what comes as a double whammy for the Indian cement sector, Finance Minister Arun Jaitley today hiked excise duty by Rs 100 per tonne to Rs 1000 per tonne.

Jaitley in his Budget speech said: Tariff rate of excise duty in goods falling under Chapter sub-heading 2523 29 is being increased from Rs 900 per tonne to 1,000 per tonne.Railway Minister Suresh Prabhu on Thursday announced a 2.7 percent hike in freight rates for cement in the Railway Budget 2015-16. This hike is likely to increase the manufacturing cost for cement by Rs 7-10 per bag and corporates said they’d await the Union Budget before taking a call on raising prices.Cement companies have been under pressure over the past few quarters because of a sluggish economy. While corporate confidence has improved, that is yet to translate into activity on the ground. Weak demand, below average monsoon, falling prices and over-capacity are some of the issues the sector has been grappling with.Indian cement sector contributes 67 percent to the housing sector, 13 percent to infrastructure construction and 11 percent to commercial construction according to data from Invest India, an agency dedicated to investment promotion and facilitation.

The industry was expecting FM Jaitley to announce increased allocation of funds towards critical infrastructure projects that would provide a much needed boost for the sector. The sector was also hoping to get some significant Budget allocation for low-cost housing and for Smart Cities which would lead to a substantial rise in demand.

On the taxation front, the industry was hopeful of getting complete exemption from Minimum Alternate Tax (MAT) under 80IA for infrastructure projects. Under the current 18.5 percent rate, companies need to pay MAT on book profit thereby negating the tax benefits it would receive under section 80IA.Here's what was announced in the last Budget: