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December, 2010

Sector structure/Market size

India is the world's second largest producer of cement according to the Cement Manufacturers’ Association.

During September 2010, the cement production touched 12.54 million tonnes (MT), while the cement despatches quantity was 12.56 MT during the month. The total cement production during April-September 2010-11 reached 81.54 MT as compared to 77.22 MT over the corresponding period last fiscal. Further, cement despatches also witnessed an upsurge from 76.50 MT during April-September 2009-10 to 81.10 MT during April-September 2010-11.

Moreover, the government's continued thrust on infrastructure will help the key building material to maintain an annual growth of 9-10 per cent in 2010, according to India's largest cement company, ACC.

In January 2010, rating agency Fitch predicted that the country will add about 50 million tonne cement capacity in 2010, taking the total to around 300 million tonne.

Further, speaking at the Green Cementech 2010, a seminar jointly organised by the Confederation of Indian Industry (CII) and the Cement Manufacturer's Association in Hyderabad in May 2010, G Jayaraman, Executive President, Birla Corporation Ltd, said that in 2009, 40 MT of capacity was added and he expects a similar trend to follow this year.

New Investments

Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 1,971.79 million between April 2000 and September 2010, according to the Department of Industrial Policy and Promotion (DIPP).

  • Dalmia Bharat Enterprises plans to invest US$ 554.32 million to set up two greenfield cement plants in Karnataka and Meghalaya.
  • Bharathi Cement plans to double its production capacity by the end of the current financial year by expanding its plant in Andhra Pradesh, with an investment of US$ 149.97 million.
  • Madras Cements Ltd is planning to invest US$ 178.4 million to increase the manufacturing capacity of its Ariyalur plant in Tamil Nadu to 4.5 MT from 2 MT by April 2011.
  • My Home Industries Limited (MHI), a 50:50 joint venture (JV) between the Hyderabad-based My Home Group and Ireland's building material major CRH Plc, plans to scale up its cement production capacity from the existing 5 million tonne per annum (mtpa) to 15 mtpa by 2016. The company would undertake this capacity expansion at a cost of US$ 1 billion.
  • Shree Cement, plans to invest US$ 97.13 million this year to set up a 1.5 million MT clinker and grinding unit in Rajasthan. Moreover, in June 2010, Shree Cement signed a memorandum of understanding (MoU) with the Karnataka government to invest US$ 423.6 million for setting up a cement unit and a power plant. US$ 317.7 million will be used to set up a cement manufacturing unit with an annual capacity of 3 mtpa while the balance will be for the 100 mega watt power plant.
  • Jaiprakash Associates plans to invest US$ 640 million to increase its cement capacity.
  • Swiss cement company Holcim plans to invest US$ 1 billion in setting up 2-3 greenfield manufacturing plants in the country in the next five years to serve the rising domestic demand. Holcim is present in the country through ACC and Ambuja Cements and holds around 46 per cent stake in each company. While ACC operates 16 cement plants, Ambuja Cements controls five plants in India. The Aditya Birla group is the largest cement-making group by capacity in the country and controls Grasim Industries and Ultratech Cement.

Government Initiatives

The cement industry is pushing for increased use of cement in highway and road construction. The Ministry of Road Transport and Highways has planned to invest US$ 354 billion in road infrastructure by 2012. Housing, infrastructure projects and the nascent trend of concrete roads would continue to accelerate the consumption of cement.

Increased infrastructure spending has been a key focus area. In the Union Budget 2010-11, US$ 37.4 billion has been provided for infrastructure development.

The government has also increased budgetary allocation for roads by 13 per cent to US$ 4.3 billion.

Gujarat plans to treble its cement production capacity in 3-5 years. Proposals have been invited from cement companies such as ACC, ABG, Ambuja Cement, Emami, Indiabulls, Adani group, Ultratech and L&T and the state hopes to raise its capacity from 20 million tonnes per annum to 70 million tonne. The state will host the biennial Vibrant Gujarat Global Summit in January 2011 and expects to witness investment proposals worth US$ 13.2 billion in the cement sector.

Exchange rate used: 1 USD = 45.42 INR (as of December 2010)