The Indian cement industry is directly related to the country's infrastructure sector and thus its growth is paramount in determining the development of the country. With a current production capacity of around 366 million tonnes (MT), India is the second largest producer of cement in the world and fueled by growth in the infrastructure sector, the capacity is expected to increase to around 550 MT by FY20.
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 the likes of Lafarge, Holcim and Vicat have invested in the country in the recent past. Another factor which aids the growth of this sector is the ready availability of the raw materials for making cement, such as limestone and coal.
According to data released by the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted foreign direct investment (FDI) worth US$ 2,984.29 million between April 2000 and September 2014.
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 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. Some of them 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:
With the Government of India providing a boost to the infrastructure and various housing projects coming up in urban as well as rural areas, the cement sector has enough scope for development in the future.
Furthermore, the Ambuja Cement Company through its Customer Support Group has decided to train 18,000 masons and 15,000 contractors in certified construction courses by 2020. This will provide trained professional manpower and help in development of the overall infrastructure sector in the country.
Exchange Rate Used: INR 1 = US$ 0.016 as on November 27, 2014
References: Media Reports, India in Business, Cement Corporation of India, Department of Industrial Policy and Promotion (DIPP), Cement Manufacturers Association (CMA)