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SPURT in housing and road construction — these two activities have been the key drivers, accounting for close to 10 per cent growth in cement demand in each of the last two years. The ground is well laid out for these two drivers to be at the forefront of cement demand growth for the next two-to-three years. Incentives and initiatives in the Budget have ensured that. What may, however, put a spanner in the works is the decline in rural spending due to crippling drought of last year and the prospect of another in 2003-04. The latter is if the Indian Meteorological Department is proved right this year rather than wrong as was the case last year.

Tax incentives for home loans have been untouched. They would stay that way for three years at least as Parliamentary elections loom next year. A new government may also not want to tinker with this well-received and perceived incentive in its first year. Housing loans have been growing at around 30 per cent, indicating the underlying nature of demand. This trend is likely to continue unless housing demand in rural and semi-urban areas slackens due to drought effects. The incentives granted to companies and other entities for housing projects, and for works such as slum upgradation and laying of sewerage systems will also spur demand.

The completion of the Golden Quadrilateral, which has proved a source for six to eight million tonnes of cement, is imminent. But the East-West and North-South corridors are set to take over and provide adequate replacement. The financing for these projects too has been tied to a dedicated cess on petrol and diesel, a la the Golden Quadrilateral. The planned spending of about Rs 48,000 crore over a three-year period on smaller road projects covering 10,000 kilometres will be an incremental source of demand. But in the next three to six months, the factor to watch out for will be any drought-related effects.

S. Vaidya Nathan

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