India's potential in infrastructure is vast and cement plays a vital role in the growth and development of the nation. India is the second largest producer of cement in the world. The cement industry has been expanding on the back of increasing infrastructure activities and demand from housing sector over the past many years.
India's cement sector had clocked a 5.6 per cent growth in 2012–13 and projects a growth of 5–6 per cent in the next fiscal, which would be supported by an expected increase in demand from the rural sector and tier II and tier III cities, as per India Ratings and Research report. An investment allowance for infrastructure projects of Rs 100 crore (US$ 16.05 million) and above has also been announced by the Government.
In addition, cement production in India is expected to touch 407 million tonnes (MT) by 2020.
Cement consumption in India is expected to rise by 8–9 per cent over the next year, taking the estimated cement consumption in 2013–14 to about 280–285 MT, from around 260 MT in the 2012–13 fiscal, as per the Cement Manufacturers Association (CMA).
The cement industry may continue to witness a steady market for the better half of the year with fresh capacity of 20 MT going on stream in 2014, taking the industry capacity to 370 MT.
The Indian cement sector is expected to witness positive growth in coming years, with demand set to increase at compound annual growth rate (CAGR) of more than 8 per cent during 2013–14 to 2015–16, according to RNCOS report titled, ‘Indian Cement Industry Outlook 2016’.
The cement and gypsum products sector in India has attracted foreign direct investments (FDI) worth US$ 2,879.95 million between April 2000 to November 2013, according to data published by the Department of Industrial Policy and Promotion (DIPP).
The housing segment accounts for a major portion of the total domestic demand for cement in India. The Government of India (GoI) is strongly focused on infrastructure development to boost economic growth and plans to increase investment in infrastructure to US$ 1 trillion in the 12th Five Year Plan (2012–17). During the Plan, the industry is estimated to add a capacity of 150 MT.
An EAC under the Ministry of Environment, Go I, has given its approval to India Cements to double its capacity and set up a 40 megawatt (MW) power plant at one of its facilities in Tamil Nadu at a cost of Rs 810 crore (US$ 130.01 million). The proposed expansion project will come up at Dalavoi in Ariyalur district.
Giving impetus to the market, the Goa State Pollution Control Board (GSPCB) has signed a memorandum of understanding (MoU) with Vasavdatta Cement, a company with its plant in Karnataka. The firm would use the plastic waste collected by the state agencies and village panchayats from Goa as fuel for its manufacturing plant.
India has the capacity to become the world's third largest construction market by 2025 and a US$ 1 trillion market, according to a study by Global Construction Perspectives and Oxford Economics.
The focus of the government on strengthening infrastructure, promotion of low-cost affordable housing, etc, is expected to drive cement demand.
With the ever-increasing industrial activities, real estate, construction and infrastructure, in addition to the onset of various Special Economic Zones (SEZs) being developed across the country, there is a continuous demand for cement.
Moreover, major cement manufacturers in India are also increasingly using alternate fuels, especially bioenergy, to fire their kilns. The step will not only help to reduce production costs of cement companies, but is also proving effective in reducing emissions.
Exchange Rate Used: INR 1 = US$ 0.01605 as on February 12, 2014
References: Media Reports, Press Information Bureau (PIB), Cement Corporation of India, Department of Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)