India has lifted a ban on cement exports, the trade ministry said, as price pressures eased and domestic demand depressed due to a slow-down in construction activity. The Government had banned cement exports in May as part of efforts to increase local supplies and check rising prices. In the past few months, construction activity has slowed down as high interest rates trimmed demand for new homes while companies deferred expansion plans due to the credit crunch. India’s cement output was 14.34 million tonnes in November, less than 14.76 million tonnes produced in October, according to the Cement Manufacturer’s Association. Annual inflation slowed to 6.84% in the first week of December from a high of 12.9% in early August, reflecting a slump in oil and other commodity prices. The Indian economy expanded by 7.6% in the September quarter , and analysts expect Asia’s third-largest economy to end the 2008-09 fiscal year with less than 7% growth compared with 9% of last year. In December, the authorities announced a slew of steps including interest rate cuts, a massive spending plan and duty cuts including that for cement to arrest the slowdown.

The 206.46 million tonne cement industry is through tough times in the turbulent economic condition and financial crunch. The cement industry had added only 8.16 million tonne in November 2008. The Government recently imposed 4% cut in excise duty across industry and a package for the housing industry, which consumes about 65% of the total cement produced. Unfortunately, the Railway hiked the freight cost marginally, thereby reducing the benefit.
The Cement industry welcomed the second stimulus package, though it felt that the Government could have offered a better deal for the sector. In a bid to boost the sagging economy, the Government eased the fund flow for the infrastructure projects. India Infrastructure Finance Company (IIFCL) will be raising Rs. 10,000 crore through tax-free bonds for refinancing bank lending of longer maturity to eligible infrastructure bid-based public-private partnership projects.
Taking a cue from the Government, the Reserve Bank of India cut the cash reserve ratio (a portion of the deposit to be parked with the RBI) by 50 basis points to 5 per cent and reduced repo rates (the rate at which RBI lends to bank) and reverse repo (the rate at which RBI borrows from banks) by 100 basis points each to 5.5 per cent and 4 per cent respectively.
Mr. A. L. Kapur, Managing Director, Ambuja Cement, said “Boosting infrastructure activities will have marginal impact as these projects account for just 25-30 per cent of the total demand”. However, the possible cut in lending rates by banks may revive some of the abandoned housing projects thus improving demand for cement, he added.
On the RBI measures, Mr. Vinod Juneja, Managing Director, Binani Cement, said, “I think there is still room for reducing CRP by 100 basis points and repo and reverse repo by another 50 basis points”.


Article From : Cement Review: March 4, 2009