• November 30, -0001

Introduction

India is the second largest producer of cement in the world. The production of cement in India has increased at a compound annual growth rate (CAGR) of 9.7 per cent to reach 272 million tonnes (MT) in the period 2006–2013. It is expected to touch 407 MT by 2020.

India's potential in infrastructure is vast. It has the capacity to become the world's third largest construction market by 2025, adding 11.5 million homes a year to become a US$ 1 trillion a year market, according to a study by Global Construction Perspectives and Oxford Economics. This opens up a tremendous window of opportunity for the country’s cement industry.

Notwithstanding its current position one of the leaders in cement production, India’s riches in the sector remain somewhat untapped. “Lafarge's India business has been very successful and the country is among the top 10 markets globally for Lafarge. But going forward, we should rank higher because of the potential of the Indian market,” says Mr Martin Kriegner, CEO of the Indian branch of the world’s largest cement manufacturer, Lafarge.

Market Size

The Indian cement sector is expected to witness positive growth in the coming years, with demand set to increase at a CAGR of more than 8 per cent in the period FY 2013-14 to FY 2015-16, according to the latest report titled ‘Indian Cement Industry Outlook 2016’ by market research consulting firm RNCOS. The report further observed that India’s southern region is creating the maximum demand for cement, which is expected to increase more in future.

The cement and gypsum products sector has attracted foreign direct investments (FDI) worth US$ 2,656.29 million in the period April 2000–August 2013, according to data published by the Department of Industrial Policy and Promotion (DIPP).

Investments

• Prism Cement Ltd has become the first Indian company to get the Quality Council of India's (QCI) certification for its ready-mix concrete (RMC) plant in Kochi, Kerala. The company received the certification from Institute for Certification and Quality Mark (ICQM), a leading Italian certification body authorised to oversee QCI compliance.
• UltraTech Cement, an Aditya Birla Group Company, has acquired the 4.8 million tonne per annum (MTPA) Gujarat unit of Jaypee Cement Corp for Rs 3,800 crore (US$ 595.61 million).
• ACC Ltd plans to invest Rs 3,000 crore (US$ 470.22 million) to expand its capacity by nearly 4 MT a year in three eastern region states, over the next three years.
• Reliance Cements Co Pvt Ltd will set up a 3 MTPA grinding unit at an estimated cost of Rs 600 crore (US$ 94.04 million). The unit is likely to come up at Raghunathpur in Purulia, West Bengal.
• Reliance Cement Co, a special purpose vehicle (SPV) of Reliance Infrastructure Ltd, is commissioning its first 5 MTPA plant in Madhya Pradesh. The project has been implemented at a cost of approximately Rs 3,000 crore (US$ 470.22 million).
• Zuari Cement plans to set up a cement grinding unit at Auj (Aherwadi) and Shingadgaon villages in Solapur, Maharashtra. The new unit will have a production capacity of 1 MTPA and is expected to be operational by the second quarter of 2015.
• JSW Steel has acquired Heidelberg Cement India's 0.6 MTPA cement grinding facility in Raigad, Maharashtra, for an undisclosed amount.

Government Initiatives

Giving impetus to the market, the Indian government plans to roll out public-private partnership (PPP) projects worth Rs 1 trillion (US$ 15.67 billion) over the next six months. The Principal Secretary in the Prime Minister's Office (PMO) will monitor these projects.

Also, the steering group appointed by Dr Manmohan Singh, Prime Minister of India, to accelerate infrastructure investments, has set deadlines for the awarding of projects such as Mumbai rail corridor and Navi Mumbai Airport, among others.

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.

Road Ahead

The globally-competitive cement industry in India continues to witness positive trends such as cost control, continuous technology upgradation and increased construction activities.

Furthermore, major cement manufacturers in India are progressively using other alternatives such as bioenergy as fuel for their kilns. This is not only helping to bring down production costs of cement companies, but is also proving effective in reducing emissions.

With the ever-increasing industrial activities, real estate, construction and infrastructure, in addition to the various Special Economic Zones (SEZs) being developed across the country, there is a demand for cement.

It is estimated that the country requires about US$ 1 trillion in the period FY 2012-13 to FY 2016-17 to fund infrastructure such as ports, airports and highways to boost growth, which promises a good scope for the cement industry.

Exchange Rate Used: INR 1 = US$ 0.01568 as on November 12, 2013

References: Media Reports, India in Business, Cement Corporation of India, Department of Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)