Cement Company plays a major role in the growth of the nation. Cement is a key infrastructure industry. Cement industry in India was under full control and supervision of the government. However, it got relief at a large extent after the economic reform. It has been decontrolled from price and distribution on 1st March, 1989 and delicensed on 25th July, 1991. But government interference, especially in the pricing, is still evident in India.
In spite of being the second largest cement producer in the world, India falls in the list of lowest per capita consumption of cement with 125 kg. The reason behind this is the poor rural people who mostly live in mud huts and cannot afford to have the commodity. Despite the fact, the demand and supply of cement in India has grown up. In a fast developing economy like India, there is always large possibility of expansion of cement industry.
The cement industry is the building block of the nation’s construction industry. Few construction projects can take place without utilizing cement somewhere in the design. Annual cement industry shipments are currently estimated at $10.0 billion for 2008; down from $15.0 billion in 2006. U.S. cement production is widely dispersed with the operation of 113 cement plants in 36 states. The top five companies collectively operate 54.4% of U.S. clinker capacity with the largest company representing 15.9% of all domestic clinker capacity. An estimated 80.0% of U.S. clinker capacity is owned by companies headquartered outside of the U.S.
Historical Perspective:
The history of the cement industry in India dates back to the 1889 when a Kolkata-based company started manufacturing cement from Argillaceous. But the industry started getting the organized shape in the early 1900s. In 1914, India Cement Company Ltd. was established in Porbandar with a capacity of 10,000 tons and production of 1000 tons installed.
The World War I gave the first initial thrust to the cement industry in India and the industry started growing at a fast rate in terms of production, manufacturing units, and installed capacity. This stage was referred to as the Nascent Stage of Indian Cement Company. In 1927, Concrete Association of India was set up to create public awareness on the utility of cement as well as to propagate cement consumption.
The cement industry in India saw the price and distribution control system in the year 1956, established to ensure fair price model for consumers as well as manufacturers. Later in 1977, government authorized new manufacturing units (as well as existing units going for capacity enhancement) to put a higher price tag for their products. A couple of years later, government introduced a three-tier pricing system with different pricing on cement produced in high, medium and low cost plants.
Growth Profile of Cement Industry:
India is the second largest cement producing country after China with 137 large and 365 mini cement plants. The large plants employ 1,20,000 people. For the year ended March 31, 2011, the Indian cement industry is the second largest in the world. In 2010-11, total cement consumption in India stood at 300 million tonnes while exports of cement and clinker amounted to around 3 million tonnes.
The Indian cement industry is not only meeting the requirements arisen within the domestic territory but also fulfilling the burgeoning demands of the international arena. India is also exporting good amount of cement clinker and by products of cement. Due to the superlative quality, the Indian cement has occupied the high position on the global map.
The cement industry holds a significant place in the national economy because of its strong linkages to various sectors such as construction, transportation, coal and power. The cement industry in India is also one of the major contributors to the exchequer by way of indirect taxes.
Even during the global economic slowdown in 2008-09, growth in cement demand remained robust at 8.4 per cent. In 2009-10 cement consumption has short up, reporting, on an average, 12.5 per cent growth in consumption during the first eight months with the growth being fuelled by strong infrastructure spending, especially from the Government Sector.
India produces variety of cement based on different compositions such as Ordinary Portland cement, Portland Pozzolana, Portland Blast Furnace Slag cement, white cement and specialized cement. Cement in India produced as per the Bureau of Indian standards comparable with the best in the world.
Expanding Market Size:
The Indian cement industry can be divided into five geographical zones-North, South, East, West and Central-based on localized differentiation in the consumer profile and supply-demand scenario. Demand in the cement industry has been wonderful growth on the back of infrastructure, residential and commercial projects. Cement production in India is anticipated to increase to 315-320 million tonne (MT) by end of 2011-12 from the current 300 MT. According to Cement Manufactures Association, the country is expected to reach a capacity of 550 million tonnes by 2020.
This industry has seen constant modernization and implementation of latest technologies during past few years. About 93 per cent of the total capacity is based on eco-friendly dry process technology. Progressive liberalization and easing of foreign direct investments (FDI) norms in various sectors paved the way for growth in FDI, which led to growing demand for office space from multinational companies (MNCs) and other foreign investors.
Total FDI in the cement sector between April 2000 and August 2010 stood at US $1.9 billion. The cement industry in India is known for its linkages with other sectors. The Government of India has taken various steps to provide the required impetus to the industry. At present 100 per cent FDI is allowed in this industry. Both the state and export policies promote cement production.
Exporters can claim duty drawbacks on imports of coal and furnace oil up to 20 per cent of the total value of imports. Most state governments offer fiscal incentives in the form of sales tax exemptions/deferrals in order to attract investment. A contract worth Rs.1,200 crore (US $228.59 million) has been awarded to the Perth based India Resources by Prism Cement towards development of a captive coal mine, emphasizing the growing trend of Indian companies outsourcing their mining operations to foreign entities.
India Cement has acquired a coal mine in Indonesia for US$ 20 million. It is expected to be operational by January 2012. Germen cement giant Heidelberg and domestic cements have shown interest to be the joint venture partner in state-run Rashtriya Ispat Nigam’s proposed Rs.1,000 crore (US$ 190.45 million), 3 mt pa cement plant at Vizag.
Cement Production and Growth:
India, being the second largest cement producer in the world after China with a total capacity of 151.2 Million Tones (MT), has got a big No. Cement Companies. With the government of India giving boost to various infrastructure projects, housing facilities and road networks, the cement industry in India is currently growing at an enviable pace. More growth in the Indian cement industry is expected in the coming years.
It is also predicted that the cement production in India would rise to 236.16 MT in FY 11. It’s also expected to rise to 262.61 MT in FY 12. The cement industry in India is dominated by around 20 companies, which account for almost 70% of the total cement production in India. In the present year, the Indian cement companies have produced a total cement production in FY 09-10 to 231 MT.
Domestic demand plays a major role in the fast growth of cement industry in India. In fact the domestic demand of cement has surpassed the economic growth rate of India. The cement consumption is expected to rise more than 22% by 2009-10 from 2007-08. In cement consumption, the state of Maharashtra leads the table with 12.18% consumption, followed by Uttar Pradesh. In terms of cement production, Andhra Pradesh leads the list with 14.72% of production, while Rajasthan remains at second position.
Cement Dispatches:
Cement industry in India has successfully maintained almost total capacity utilization levels, which resulted in maintaining a 10% growth rate. In 2006-07, the total despatch was 155 MT, which rose up to 170 MT in 2007-08. The month of October 2009 saw a cement dispatch of 12.22 MT, which was almost 9% higher than the total cement dispatch of 11.21 MT in the same month in the 2008.
Exhibit 9.2 shows that there was an improvement in capacity utilization from 85% to 93% in 2007-08 and 2008-09 respectively. Similar trend is also reported in production and export of cement during the same period.
Technology Up-gradation Programme:
Cement industry in India is currently going through a technological change as a lot of up-gradation and assimilation is taking place. Currently, almost 93% of the total capacity is based entirely on the modern dry process, which is considered as more environment- friendly. Only the rest 7% uses old wet and semi-dry process technology.
There is also a huge scope of waste heat recovery in the cement plants, which lead to reduction in the emission level and hence improves the environment. Cement industry has made tremendous strides in technological up-gradation and assimilation of latest technology.
At present ninety three per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only seven per cent of the capacity is based on old wet and semi-dry process technology. There is tremendous scope for waste heat recovery in cement plants and thereby reduction in emission level.
One project for co-generation of power utilizing waste heat in an Indian cement plant is being implemented with Japanese assistance under Green Aid Plan. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially.
India is also producing different varieties of cement like Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement etc. Production of these varieties of cement conform to the BIS Specifications. It is worth mentioning that some cement plants have set up dedicated jetties for promoting bulk transportation and export.
Problems of Cement Industry:
Major problems of cement industry are as follows:
- Poor Government Infrastructure Spending:
Before 2010-11, there was a stimulated growth in the spending of government on infrastructure projects. But due to resource crunch government has reduced its spending on infrastructure has resulted in lower demand of cement. Private sector especially real estate sector due to financial market condition has also lowered down its demand for cement.
- High Lending Rates:
Banks’ lending rates are now hovering near the peak level so cement industry is unable to meet out its working capital requirements as well as capital expenditure programme. Actually it has affected the modernization and expansion programme of the cement industry.
- High Tariffs:
Frequent upward revision of various tariffs – high excise duty, sales tax, royalty on lime stone and coal etc. has adversely affected the demand as it has increased the cost of products to the customers. The excise duty on cement has been steadily rising.
- Poor Availability of Coal:
Coal is an important input in the cement industry. The availability of coal has remained the contentious issue for the industry as Coal India one of the largest domestic suppliers, priorities supply to the power sector as per the government direction. Coal availability in the auction conducted by the Coal India has shrunk during 2011-12 leading to sharp spike in prices. Import has also turned costlier after the rupee depreciation.
- The Power Shortage:
Power cuts, unsteady and inadequate power supply have created serious problems for cement units. Continuous process requires uninterrupted power supply to operate efficiently. Various cement plants have installed their captive power plants but their cost increases the cost of production and adversely affects the margins of the industry.
- Transportation Problem:
Indian Railways is the base for the transportation of cement in the country. But due to shortage of wagons, cement dispatches by rail have declined over the years. Besides, Railways hiked fright charges by six percent. It increases the cost of supplies. However, Road transport is offering all help in logistic management of cement industry.
Prospects:
Cement industry has affected a gradual shift from wet to modern, fuel efficient dry process plants. Most of these new plants have adopted state-of-the-art technology. Existing plants are also implementing modernization programmes to improve their performance. This has resulted in better capacity utilization, higher productivity; reduce energy consumption and better quality of cement.
Available study suggests that the cement industry in India witnessed massive growth on the back of various industrial development and pro-economic policies of the Union Government. This has helped attracting the attention of various global cement giants, thereby sparking off a wave of mergers and acquisitions in several states. The report has estimated India’s cement consumption to grow at a compound annual growth rate (CAGR) of 11 percent, between 2011-12 and 2013-14.
The study, which focused on the demand-supply outlook and the cement pricing in various regions of the country revealed that the Andhra Pradesh topped the chart in terms of large plants and its installed capacity in India. Fast growing economy and the regulatory support is expected to further encourage the industry players to embark on expansion plans. Furthermore, it is infrastructure projects, road networks and housing facilities will boost the growth in cement consumption in the near future.
Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently 93 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only 7 per cent of the capacity is based on old wet and semidry process technology. There is tremendous scope for waste heat recovery kiln cement plants and thereby reduction in emission level.
One project for co-generation of power utilizing waste heat in an Indian cement plant is being implemented with Japanese assistance under Green Aid Plan. The induction of advanced technology has helped the industry immensely to conserve energy and fuel and to save materials substantially.
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