Highways and Housing Sector Revival Will Help Cement Demand: Jaitley assures Srinivasan

Published: 19th January 2015 04:34 PM  |   Last Updated: 19th January 2015 04:34 PM   |  A+A-

CHENNAI: Union Minister for Finance Arun Jaitley assured India Cements top honcho N Srinivasan today that the concerted efforts of the Modi government to revive the flagging housing and Highways infrastructure sectors would help cement demand get back the glory days of the early 2000s.

The Minister was replying to Srinivasan's statement on the cement industry during an interactive session organised by the Confederation of Indian Industry. In his statement, Srinivasan had stressed that the drastic reduction in demand in the last decade had resulted in cement plants consistently operating at less than 55% capacity and requested the government for a resolution.

Jaitley began by pointing out that the issue was part of the legacy that had been handed down by a decade of UPA rule. But, the Minister assured Srinivasan, the situation should begin improving, albeit slowly, once government efforts to revive Highways and Housing begin to pay off.

"Disputes, high interest rates and contractors on the verge of bankruptcy have meant that the housing sector has  slowed down. But we are trying to revive both these sectors," said Jaitley.

The government has been transferring some benefits from falling oil prices to the Highways authority. It has also begun to boost affordable housing through land law reform and interest rate cuts.

"We want to start with some public funding to Highways so that the authority starts spending it's own money. This should eventually bring in the private players too. Land law liberalisation and falling interest rates will also boost affordable housing. But, these will take some time," he said.

The Minister also placed the blame for the less than admirable state of the two sectors squarely on the UPA's shoulders.

"The last time we were in power we had made it mandatory for some amount of cement to be used in Highways. Interest rates were at moderate levels and EMI on houses had consequently become cheaper than rent, so there was a housing boom. This was what moved up cement demand," he said.

But the status of both these huge infrastructure sectors had been reversed in a decade, the Minister pointed out.

"We left Highways as one of the biggest success stories of the first NDA government. What we inherited in 2014 was a state where the Highways Minister would come out with new tenders but not a single person would pick it up," he pointed out.

Higher interest rates during the last few years have also meant housing had taken a hit. Both these factors had combined to drop cement demand by a significant factor.

According to Srinivasan, the last 5-6 years have seen nil growth in cement, a drastic turnaround from the 12% demand increase that the sector was seeing in the early 2000s. India's installed production capacity is 350 million tonnes per annum.

"We are operating at 55% capacity, with one or, at most, two shifts a day. I can't store cement because of environmental concerns. It's an enormous cost and the economy is struggling. A large portion is going as tax but we have no problem with that," he had told Jaitley in his request for a solution.

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