The cement industry has heaved a sigh a relief as the budget has proposed removal of the 5 per cent restriction on modvat credit, as it may give a boost to cement split-location units.

"The renewed thrust on housing and road development will help the cement industry in a major way," said Gujarat Ambuja Cements treasurer Anil Singhvi.The decision to amend foreclosure laws, says Singhvi, may accelerate the mega housing plans of the government, which in turn will benefit cement companies.

However, the marginal hike in effective import duty for coal from 19.6 per cent to 21.16 per cent will adversely affect the industry bigwigs - Larsen & Toubro, ACC and Gujarat Ambuja Cements - which import bulk of their coal requirements.

Besides, the 10 per cent surcharge will not findfavour with the industry, which is going through the longest ever spell of recession.

"The budget proposal to hike import duty of coal and imposition of surcharge will adversely affect cement companies, who are also faced with a harsh freight structure," said ACC director AK Chatterjee.

The silver lining for the industry has been the proposal to hike Modvat claim to 100 per cent. Given the new marketing dynamics, cement companies are gradually shifting towards split-location units wherein they move clinker from mother units to their own plants or grinding units.

Under a split location structure, grinding units are located close to the consumption centres, and the 95 per cent restriction on Modvat claim in effect increase the excise duty on cement in the second stage process by 5 per cent. The anomaly has been corrected, which according to Chatterjee will help cement companies.

Analysts say that the industry has been denied any direct benefit, as most sops on offer are incumbent on the ambitiousinfrastructure and housing plans.

"There is hardly anything in this year's budget which will directly give a push to the cement industry," said an analyst. Meanwhile , the steel industry, like the ongoing tussle between the hot rolled (HR) coils producers and the cold rollers, is divided over the impact of the Union budget on the industry.

While the HR coils makers feel the budget will have an adverse effect on the steel industry due to lowering of duty on HRC imports and the marginal hike in excise duties, the cold rollers feel that they have been given enough breathing room.

The withdrawal of the five per cent special additional import duty has now brought down the net duty on HR coils from 30 per cent to 27.5 per cent, while that on cold-rolled coils is now higher at 38.5 per cent against 35 per cent earlier. Cold rolled coils now will come under a higher duty slab of 35 per cent, while the net import duty will be 38.5 per cent inclusive of the 10 per cent surcharge.

The cold rolled producersfeel that this 11 per cent duty differential, due to rationalisation of import duties, is quite positive and will help the cold rolled producers to survive in a very competitive and depressed market.The duty on scrap, a substitute for sponge iron, has also come down from 10 per cent earlier to 5.5 per cent. This includes the five per cent base duty and the 10 per cent surcharge.

The sponge iron producers will, hence, will be under substantial threat from cheaper scrap imports, said a marketing chief of an integrated steel producer.

Input costs are also expected to rise due to changes in the excise structure. However, steel companies were unanimous that there will not be any immediate price hike as a result of the Union budget.

"Price hikes have already been planned following the imposition of the floor price on imports. But the steel companies will have to absorb rise in input costs for the time being," said a senior steel industry official. The budget will have only minor effect as far the finishedgoods are concerned.

The excise on finished steel will go up by merely one per cent, from 15 per cent to 16 per cent. Allowing 100 per cent moderated value-added tax (modvat) as against 95 per cent is a positive step announced by the finance minister and has restored the confidence of the industry, said the chief of a cold rolled producer.

However, excise duty on galvanised corrugated sheets, which was required to be brought down, has not been done which would have helped the housing sector as well as farmers who are the major users of galvanised corrugated sheets.

The encouragement to the housing sector and setting up of cold storage will definitely lead to increase in demand for steel which will, in turn, give a spur to the economic activity something that is very much required by the industry.