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Post Budget Scenario


Cement Industry

Budget Offers
Customs duty reduced from 35% to 25%.

Cement purchased for Gujarat relief work to be exempt from Excise duty.

Step up in spending on roads (up 93%)

The dividend tax has been reduced to 10% from 20%

The Impact
Although the rate of customs duty has been reduced by 10% there is likely to be no significant impact on the industry. This is largely because requisite infrastructure to import cement does not exist in the country. In the near to medium term this development is likely to have no impact.

The Gujarat earthquake is likely to trigger large-scale construction activity. The exemption from excise duty for cement procured for reconstruction purposes will only help lift demand as cement becomes more affordable.

The decision to step up spending on roads will benefit the cement sector in terms of higher growth in demand. Moreover, with almost all contracts for the golden quadrangle to be awarded by June 2001, cement companies can look forward to higher demand in coming months.

The reduction in the dividend tax will benefit companies, as the tax outgo will reduce. This will add to cash flows, or alternatively, could result in higher dividend payouts.