FICCI suggests resuming operations of downstream industries to minimise COVID-19 impact on cement sector

Industry body FICCI on Tuesday suggested to the government to resume operations of downstream industries like real estate and construction of roads and highways to minimise the impact of COVID-19 pandemic on cement sector.

According to rating agency ICRA, cement demand is expected to decline by 10-12 per cent in the current fiscal year as construction activities across the country have come to a standstill since March 25 due to the ongoing lockdown.

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Even as the government has allowed resumption of activities in certain non-hotspot zones, cement demand is not likely to pick up as real estate sector, which accounts for 60-65 per cent of cement demand, is concentrated in major metros which are currently in lockdown.

"As the demand for cement is expected to drop drastically in this fiscal due to the nationwide lockdown, FICCI suggests that government should promote and resume operations of downstream industries like real estate, development of roads, highways, rivers and canals projects, among others," the industry body said in a statement.

FICCI has also recommended fast tracking investment in infrastructure sector by front loading investment in National Infrastructure Pipeline (NIP) as it would help in rejuvenating the demand for cement sector.

Last year, the government announced the NIP with a sanctioned amount of Rs 102 lakh crore to undertake social and economic infrastructure projects in India over a period of five years.

Further, to reduce financial burden on the sector, FICCI has recommended 10 per cent enhancement on credit limit and sanction of additional 25 per cent on current working capital limits for cement companies.

In addition to this, the industry body has recommended an additional three-months extension of moratorium granted on payment of interest and repayment of loans.

FICCI also batted for immediate disbursement of central and state subsidies to improve cash flows for companies.

"To further reduce financial burden on sector, FICCI has recommended deferment of royalty, DMF (District Mineral Foundation) and NMET (National Mineral Exploration Trust) by six months till the economic situation stabilises," it said.

To protect domestic cement manufacturers from possible dumping of imports post-lockdown, the industry body has suggested that prioritisation should be given to domestic value addition for raw materials like limestone, fly ash used in cement manufacturing as compared to export of these items.

It said domestic coal prices should be made more competitive by lowering notified prices by Coal India subsidiaries as imported coal prices have reduced substantially.

"To save the industry from additional capex expenses amidst the current scenario, FICCI has further asked the government for relaxation in environmental emission norms for cement plants for two years," it added.