India is the second largest producer of cement in the world. No wonder, 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, both from Indian as well as foreign investors.
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 initiatives, such as development of 98 smart cities, is expected to provide a major boost to the sector.
Aided by suitable Government foreign policies, several foreign players such as Lafarge-Holcim, Heidelberg Cement, 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 raw materials for making cement, such as limestone and coal.
Cement production reached 329 million tonnes (MT) in FY20 and is projected to reach 381 MT by FY22. However, the consumption stood at 327 MT in FY20 and will reach 379 MT by FY22. The cement production capacity is estimated to touch 550 MT by 2020.
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 in the country. A total of 210 large cement plants account for a cumulative installed capacity of over 410 MT, with 350 small plants accounting for the rest. Of these 210 large cement plants, 77 are in the states of Andhra Pradesh, Rajasthan and Tamil Nadu.
Sale of cement in India stood at Rs 58,407 crore (US$ 8.29 billion) in 9MFY20.
According to the data released by Department for Promotion of Industry and Internal Trade (DPIIT), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2020.
Some of the major investments in Indian cement industry are as follows:
In order to help private sector companies, thrive in the industry, the Government has been approving their investment schemes. Some of the initiatives taken by the Government off late are as below:
An outlay of Rs 27,500 crore (US$ 3.93 billion) has been allotted under Pradhan Mantri Awas Yojana in the Union Budget 2020-21.
The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in future. In the next 10 years, India could 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 export and will logistically be well armed to face stiff competition from cement plants in the interior of the country. India’s cement production capacity is expected to reach 550 MT by 2025.
Due to the increasing demand in various sectors such as housing, commercial construction and industrial construction, cement industry is expected to reach 550-600 million tonnes per annum (MTPA) by the year 2025.
Number of foreign players are also expected to enter the cement sector owing to the profit margins and steady demand.
Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123
References: Media Reports, Press releases, Union Budget 2019-20, Edelweiss Securities Ltd.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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