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March, 2011

Sector Structure/ Market Size

India is the second-largest cement producer in the world, with an installed capacity of about 236 million tonnes (MT) in 2009–2010. The sector is expected to add an additional capacity of 92.3 MT by 2013. As a result, the industry will have a total installed capacity of 383.5 MT by March 2013.

During January 2011, the cement production touched 14.52 MT, while the cement despatches quantity was 14.47 MT during the month. The total cement production for April-January 2010-11 reached 136.51 MT as compared to 130.85 MT over the corresponding period last fiscal. Further, cement despatches also witnessed an upsurge from 130.09 MT during April-January 2009-10 to 135.56 MT during April-January 2010-11.

According to latest research report “Indian Cement Industry Forecast to 2012”, produced by RNCOS, cement production in India has grown at a brisk pace during the last few years. Despite recession, Indian cement industry performed incredibly well amid recent boom in the infrastructure and housing markets. In view of the upcoming massive infrastructure projects, manufacturers are aggressively increasing their production capacities and the study foresees a 10.5 per cent CAGR growth in cement production during FY 2010-FY 2014.

According to a press release, the push in cement demand during the last fiscal was attributed to revival of infrastructure and real estate projects, especially in rural areas.

New Investments

Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 2,315.58 million between April 2000 and January 2011, according to the Department of Industrial Policy and Promotion (DIPP).

  • BK Birla Group outfit, Kesoram Industries, is setting up a 2,000-tonne a day packaging unit in Medak district of Andhra Pradesh at a cost of Rs 8 crore (US$ 1.76 million), according to a filing by the company to the stock exchanges. The proposed unit would cater to the packing needs of its cement manufacturing unit at Sedam in Karnataka.
  • Birla Corporation, Flagship Company of the M. P. Birla Group, is planning to set up a 1 MT cement plant in Assam at an investment of around Rs.450 crore (US$ 99 million). The company has signed a memorandum of understanding (MoU) with the Assam Mineral Development Corporation to this effect.
  • 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.
  • To cater to the growing demands, Everest Industries is planning to set up a new manufacturing facility in East India. The company is looking at acquiring about 22 acres for the facility that will start with the production of roofing materials and other products will be rolled out in a phased manner. Besides, the company is likely to consider setting up a new factory for the fibre cement boards as it is at present utilising almost 100 per cent of its 90,000 tonne of installed capacity across different plants.
  • 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. Finance Minister Pranab Mujherjee has proposed to earmark US$ 47 billion for infrastructure development during fiscal 2011-12.

The infrastructure sector has received an impetus in the form of increased funds and tax related incentives offered to attract investors for tapping the infrastructure opportunities around the country. Introduction of tax free bonds, creation of infrastructure debt funds, formulating a comprehensive policy for developing public private partnership projects are some announcements which will give a fillip to the infrastructure sector which is the backbone of any economy.