Cement demand to benefit from higher allocation for rural roads
The government’s decision to increase allocation to Pradhan Mantri Gram SadakYojana (PMGSY) by 22% augurs well for cement manufacturers amid weak demand for more than three years. The government raised the allocation to PMGSY to Rs 19,000 crore from Rs 15,500 crore according to the revised estimates for the current fiscal.
Among cement players, Ultratech Cement, Shree Cement, Dalmia Bharat, The Ramco Cements and Ambuja Cements are expected to benefit from this increase in allocation to PMGSY.
Rural cement demand is expected to grow better than the urban demand. Nearly half of the cement demand from road construction is attributed to PMGSY. Under the scheme, the government has connected 15.8 lakh habitations or 89% of the total rural habitations through pucca roads.
Under PMGSY scheme, the government has targeted construction of 57,000 km of rural roads. According to various analysts’ estimates, road construction under PMGSY has grown at compounded annual growth rate (CAGR) of 8.5% in the past five years ending FY17. In the next three years ending FY21, this scheme is expected to generate cement demand in the range of 42-47 MT.