Budget boost, price hikes to support cement sector

Cement and steel sectors may witness demand boost, as the Union government allocated %12.2 trillion for capex in its Budget for 2026-27, given they are key commodities for infrastructure projects.

- DEVANGSHU DATTA

The Budget allocation is up about 9 percent in nominal terms, and given grant-in-aid, it would push effective capex for financial year 2027 (FY27) to 217.1 trillion. That may translate into high single-digit growth in cement demand volume. Conservatively, cement demand volume should grow by 7 per cent or more in FY27, led by higher spend on roads, railways and possibly housing.

If FY27’s Budget estimates (BE) are expended, it may actually lead to higher cement consumption compared to FY26, since the revised estimates for 9MFY26 were lower than the BE. Apart from government-driven infrastructure spending, there could be a demand pull from urban development in Tier-II and Tier-III cities. It may be noted that sustainability targets will lead to greener production processes. The government set mandatory emission reduction targets for 186 cement plants in Q3FY26, aiming for mid-single digit reductions in emissions by FY27. This may lead to changed cost structures.