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Last Updated: August 18, 2015
Latest update: August, 2015
•Domestic cement consumption is expected to have reached 324 million tonnes in FY15 from 165.63 million tonnes in FY11
•The consumption is further expected to increase at a CAGR of 15.7 per cent during FY11-17 and reach 398 million tonnes
•Demand will be supported by infrastructure development in tier 2 and tier 3 cities
•The country’s per capita consumption is around 190 kg, which is lower than the World average which is around 500 Kg, providing further room for demand in the industry
Last Updated: August, 2015
SECTORAL REPORT | August, 2015
India's cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge investments, from both Indian and foreign investors, making it the second largest in the world. The industry is currently in a turnaround phase, trying to achieve global standards in production, safety, and energy-efficiency.
India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it. Some of the recent major government initiatives such as development of 100 smart cities are expected to provide a major boost to the sector.
Expecting such developments in the country and aided by suitable government foreign policies, several foreign players such as Lafarge, Holcim and Vicat have invested in the country in the recent past. A significant factor which aids the growth of this sector is the ready availability of the raw materials for making cement, such as limestone and coal.
The cement market in India is expected to grow at a compound annual growth rate (CAGR) of 8.96 percent during the period 2014-2019.
In India, the housing sector is the biggest demand driver of cement, accounting for about 67 per cent of the total consumption. The other major consumers of cement include infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at nine per cent.
To meet the rise in demand, cement companies are expected to add 56 million tonnes (MT) capacity over the next three years. The cement capacity in India may register a growth of eight per cent by next year end to 395 MT from the current level of 366 MT. It may increase further to 421 MT by the end of 2017. The country's per capita consumption stands at around 190 kg.
A total of 188 large cement plants together account for 97 per cent of the total installed capacity in the country, while 365 small plants account for the rest. Of these large cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan and Tamil Nadu. The Indian cement industry is dominated by a few companies. The top 20 cement companies account for almost 70 per cent of the total cement production of the country.
On the back of growing demands, due to increased construction and infrastructural activities, the cement sector in India has seen many investments and developments in recent times.
According to data released by the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted foreign direct investment (FDI) worth US$ 3,084.89 million between April 2000 and December 2014.
Some of the major investments in Indian cement industry are as follows:
In the 12th FiveYear Plan, the government plans to increase investment in infrastructure to the tune of US$ 1 trillion and increase the industry's capacity to 150 MT.
The Cement Corporation of India (CCI) was incorporated by the Government of India in 1965 to achieve self-sufficiency in cement production in the country. Currently, CCI has 10 units spread over eight states in India.
In order to help the private sector companies thrive in the industry, the government has been approving their investment schemes. Some such initiatives by the government in the recent past are as follows:
The eastern states of India along with the border states will be the newer and virgin markets for cement companies and will contribute to their bottom line in future. In the next 10 years, India will become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance the plants in Gujarat and Visakhapatnam, will have an added advantage for exports and will logistically be well armed to face stiff competition from cement plants in the interior of the country.
A large number of foreign players are also expected to enter the cement sector in the next 10 years, owing to the profit margins, constant demand, and right valuation. Cement companies will go for global listings either through the FCCB route or the GDR route.
With help from the government in terms of friendlier laws, lower taxation, and more infrastructure spending, the sector will grow and will take India’s economy forward along with it.
Exchange Rate Used: INR 1 = US$ 0.016 as on February 24, 2015
References: Media Reports, India in Business, Cement Corporation of India, Department of Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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