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A new report released by Credit Suisse has revealed that roads and railways are likely to drive up demand for cement, albeit at a gradual pace over the next 12 months
Indian cement sector is poised to pick up, albeit gradually during FY 2014 and it is expected that the the next 12 months would be good for the industry as a whole as it provides raw materials to key ancillary industries namely road, housing and railways, all of which are expected to pick up, says Credit Suisse.
The investment bank in a report said, “We expect accretive price increases for the cement sector in FY14 as demand growth improves to 7% (5% in FY13). The recovery should be driven by strong growth in rural housing and pick-up in roads and railways investment.”
One of the key focuses for the government and policymakers is to provide low-cost housing and rural housing, all of which require pucca (and therefore cement) houses. As much as 85% of the cement demand for rural housing stems from pucca houses, it said.
Even rising rural incomes is expected to drive demand for housing. Currently, the penetration of pucca housing is low, at only 52%. To facilitate increased housing for the poor, the government has set its budget 70% higher. “Under the Indira Awas Yojna (IAY), the central government has increased allocation per household by 55% to Rs70,000 and thus the FY14 budget is set 70% higher than FY13,” Credit Suisse said.
Another key catalyst is investment on construction of roads, which has been suffering for the past three years due to policy inaction, tight financing and poor implementation. Credit Suisse feels this could change. The report states, “If initiatives taken by the NHAI (National Highway Authority of India) to revive road sector to bear fruit, it should further add to cement demand growth. Railways investment grew by 16% in FY13 and should grow 20% in FY14 with project awards expected for a dedicated freight corridor.”
However, some of the big initiatives by the government may go a long way to speeding up road construction. One of them is delinking of environmental clearance from forest clearance, in which the NHAI has moved the Supreme Court on this matter, according to Credit Suisse. Earlier, infrastructure companies had to obtain not just environmental clearance but also forest clearance which resulted in many projects being stymied or stuck. If the Supreme Court verdict is positive, it will be a big plus for the cement sector.
The second key factor is the recent Reserve Bank of India (RBI) circular which could result in banks being more lenient and more free to issue loans and bonds to infrastructure and construction companies. The circular RBI/2012-13/445 dated 18 March 2013, stated: “Prudential Norms on Advances to Infrastructure Sector to treat annuities under Build-Operate-Transfer model in respect of road/highway projects and toll collection rights, where there are provisions to compensate the project sponsor if a certain level of traffic is not achieved, as tangible securities. This is subject to the condition that banks’ right to receive annuities and toll collection rights is legally enforceable and irrevocable.” While this is more of a technicality, it could also saddle banks with more bad loans.
It is expected that railways increase investment outlay towards the Dedicated Freight Corridor (DFC) by as much as five times, to Rs7,100 crore. This would mean speedier transport (due to wide gauge) and little traffic, plus more cargo that can be carried on double-decker trains, all at cheaper rates. Cement companies, by and large, transport their cement through trains as it is cheaper than road transport.
The report expects cement sector to slowly expand margins albeit at a gradual pace for the 2014 fiscal. The report said, “Overall, we expect 7% cement demand growth in FY14 with housing growing at 8% and infrastructure at 5%. As the demand growth required to break-even new capacity is 6%, we expect margin expansion in FY14.”
Credit Suisse has picked Ambuja and ACC to perform well. “Ambuja and ACC both have strong balance sheets, with net cash at 15% of market cap and ROE at 18-19% with next two years earnings CAGR expected at 18-19%. We prefer Ambuja because of its superior regional exposure (high exposure to North India and low exposure to South India), while ACC has the highest sensitivity to both price and volumes and low exposure to Western and Central India, which are our least preferred regions due to high supply pressure,” said the report by Credit Suisse.
Earlier, Credit Suisse had written a report on cement sector which can be accessed here: Cement industry to pick up steam over the next two years: Credit Suisse
The Delhi High Court, while giving its judgement on the problems encountered by the public in the matter of assessment of tax, said, “Rejection of TDS or failure to get credit for TDS puts the tax payer through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale”
One more financial year has just come to an end and with that the job of collecting all income certificates, TDS certificates, etc has just begun to enable us to file our income tax (I-T) returns before the end of July 2013. Tax deducted at Source, or TDS for short, has been a pain in the neck for all middle class assesses and despite repeated representations, the government has not agreed to do away with the TDS, particularly in respect of bank deposits.
As per the amendment to the Finance Act last year senior citizens are not required to pay any advance tax before the close of the year, but need to pay appropriate tax, if liable, before filing the tax return. But this is only a half-hearted measure, as the government has not waived TDS even for senior citizens even though they are not required to pay advance tax, thereby putting them into great inconvenience.
Problems encountered by tax paying public:
Recently, the Federation of Tax Practitioners had filed a writ petition in the Delhi High Court seeking remedies for some of the following problems encountered by the public in the matter of assessment of tax.
1. While banks are prompt in deducting tax while paying interest, they do not bother to file TDS returns promptly due to which the tax deducted by them is not reflected in the Form AS 26 of the individual tax payer appearing in the Income Tax website, consequent to which the tax department sends notices to assessees demanding payment of tax.
2. Even if the TDS return is filed by banks, many a times, it is wrongly filed resulting in Income Tax Officers (ITOs) refusing to give appropriate credit to assessees for the tax paid by them, despite filing record of tax payments.
3. The Central Processing Unit (CPU) of the Income Tax department at Bangalore has, in respect of those assessees who have filed returns on-line, started issuing notices of late to assessees on the basis of wrong entries made in the income tax website showing tax due in respect of earlier years, and asking them to get the same rectified through their ITO, if it is not due from them. This is causing avoidable harassment to all those assessees who have no dues outstanding of earlier years and have a clean record of tax payment.
4. Even in such cases, when the assessees seek rectification of tax dues wrongly shown under their name, the ITOs do not respond promptly to such requests resulting in the CPU unilaterally adjusting the refund due for the current year to the non-existing dues shown as outstanding for earlier years, depriving the assesses the rightful refund due to them.
Judgment of the Delhi High Court providing succour to tax payers:
Surprisingly the tax authorities have admitted to the Delhi High Court that the data uploaded in their website and relied upon by their Central Processing Unit has errors and mistakes. According to this data a sum of Rs2.33 lakh crore was due and payable as past arrears (payable before 31 March 2010) by the taxpayers.
The high court in its judgment dated 14 March 2013, observed as under:
“The magnitude and number of taxpayers adversely affected can be appreciated from the past arrears figure of Rs2.33 lakh crore, which the tax authorities accept may not be correct,” states the Delhi HC order.
“This effectively means that 23 lakh taxpayers were denied refund or have been refused full refund on account of past arrears,” observes the Delhi HC order.”
The court further said, “Rejection of TDS or failure to get credit for TDS which has been deducted and paid hurts the tax payer and puts him through needless harassment, inconvenience and costs. The problem, being systematic and institutional, has to be addressed on a general scale.”
The court has, therefore, in its judgment has given directions to the tax authorities to ensure compliance of the following instructions for the benefit of the public:
If a tax payer faces any of the problems mentioned above, it is advisable to take up the matter with the jurisdictional income tax officer referring to this judgment of the Delhi High Court and seek redress if you find that the tax department is at fault and require remedial action.
(The author is a banking analyst and he writes for Moneylife under the pen-name ‘Gurpur’)