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How will India’s Railway Budget affect the cement industry?

World Cement,

India’s Railway Budget 2013 will see freight charges rise by 5.79%. The Budget aims to modernise the railway system, upgrade existing infrastructure and improve safety and passenger services. The plans include the introduction of 67 new Express trains and the construction of 500 km of new lines.

There have been mixed responses on how the budget will affect India’s cement industry. While some have argued that such improvements will benefit the cement sector, others have highlighted how increased freight charges will squeeze margins further. Cement producers such as UltraTech Cement and ACC Ltd suggested in recent financial statements that input costs would continue to rise in 2013, both due to freight charges and rising diesel prices. According to India Ratings, the 5.79% hike in freight charges could reduce operating profit margins by 0.75 – 1% for cement companies, causing cement prices to increase by Rs.2 – 4 per bag. This could be most problematic for cement markets in the south of the country, where cement demand has fallen in relation to supply, making price increases less feasible.

Edited from various sources by Louise Fordham.

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