"The lagged impact of cash crunch and state polls will take a toll on cement production in Q4. Latest data showed cement volumes in February 2017 declined the most in over a decade by 15.8 per cent yoy. Volumes also declined by 5 per cent on month-on-month basis," says an India Ratings report.
The report notes the decline in cement production growth is also on account of a high base last year, as in the March 2016 quarter production grew by 9.2, 13.5 and 11.9 per cent respectively.
Volumes of national players in Q3 contracted by 5 per cent yoy; while for Central and North-based players fell by 3 per cent and 6 per cent respectively. The Southern region, in contrast, showed strong volume growth of 21 per cent. Growth in the Southern region is led by an increase in government expenditure in Andhra Pradesh and Telangana.
As per the policy, the ministry will provide a minimum guaranteed volume linked discount, on the basis of incremental growth in gross freight revenue, in return for a commitment to provide a minimum guaranteed quantity of traffic. The discounts will range from 1.5 to 35 per cent, as per the incremental growth in gross freight revenue.
The agency believes these initiatives will increase transport of cement through rail and manufacturers will be able to control freight cost more effectively.
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