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May, 2011

Sector Structure/ Market Size

India’s cement industry has witnessed tremendous growth on the back of continuously rising demand from the housing sector, increased activity in infrastructure, and construction boom, according to RNCOS’ latest research report titled, ‘Indian Cement Industry Forecast to 2012’.

The country’s cement production is projected to grow at a compound annual growth rate (CAGR) of around 12 per cent during 2011-12 - 2013-14 to reach 303 million metric tonnes (MMT), as per the RNCOS research report.

India is the second largest cement producing country with 137 large and 365 mini cement plants. The large plants employ 120,000 people, according to a recent report on the Indian cement industry published by Cement Manufacturers Association (CMA). Cement production in the country is expected to increase to 315-320 million tonne (MT) by end of this financial year from the current 300 MT.

The cement production touched 14.50 MT, while the cement despatches quantity was registered at 14.28 MT during April 2011, as per provisional data released by Cement Manufacturer’s Association (CMA).

New Investments

After exceeding the projected cement production of 290 MT, the Cement Manufacturers Association (CMA) is targeting a production increase upto 320 MT by the year end.

  • Holcim Group, has increased its stake from 46.44 per cent to 50 per cent stake in Ambuja Cement through the creeping acquisition route. It has also increased its stake in ACC to reach 50.1 per cent.
  • The Builders Association of India (BAI) plans to set up a cement manufacturing plant at a cost of US$ 677.97 million at Anantpur in Andhra Pradesh. The plant would have a production capacity of 10 MTPA and is expected to be ready in two years.
  • Shree Cement plans to set up a two MT clinkerisation unit near Raipur, Chhattisgarh, with an investment of US$ 225.12 million.
  • 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 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, the flagship company of the M P Birla Group, is planning to set up a one MT cement plant in Assam at an investment of around US$ 99 million. The company has signed a memorandum of understanding (MoU) with the Assam Mineral Development Corporation to this effect.
  • Giving further push to industrial development in the State, the Government of Orissa through its single level window clearance committee has approved four major projects involving an investment of US$ 274.02 million.
  • The Hyderabad-based Sagar Cements Ltd and Vicat Group of France’s US$ 563.82 million worth joint venture (JV) plant is likely to commence operations next year.
  • 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 five MTPA to 15 MTPA by 2016. The company would undertake this capacity expansion at a cost of US$ 1 billion.
  • Rain Commodities Ltd, which manufactures Priya Cement, has acquired Birla Cement and Industries Ltd from Yash Birla Group for an undisclosed sum.

Cement and gypsum products have received cumulative foreign direct investment (FDI) of US$ 2,316.27 million between April 2000 and February 2011, according to the Department of Industrial Policy and Promotion (DIPP).

Cement companies have added a capacity of 89 MT in the last three years taking their installed capacity to 265 million tonnes per annum (MTPA). The companies are expected to add 35 MT of capacity by 2012-13 as compared to consumption of 179 MT in the last fiscal.

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 Mukherjee has proposed to earmark US$ 47 billion for infrastructure development during 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.

Road Ahead

Cement sales has revived across regions in December 2010. The pick-up in cement demand was attributed to revival of infrastructure and real estate projects, especially in rural areas. Demand is expected to gain momentum in the March quarter which is traditionally considered a strong as most of the infrastructure and real estate projects are revived post monsoon.