CEMENT INDUSTRY IN

INDIAN ECONOMY

Dr.C.Muthuraja, M.A, M.Phil, PhDJoint Secretary, Madurai Productivity Council

& Dean of Curriculum Development & Research

The American College, Madurai - 625 002, TAMIL NADU

(cmuthuraja@gmail.com) - (M-09486373765)

Compiled and Presented at 32nd All India Cement Seminar on ‘The Cement Industry & The Market Environment’ organized by Madurai Productivity Council in association with National Productivity Council,

New Delhi during 19-20 June 2015 at ChennaiSINCE 1881

INTRODUCTION Cement - an essential component of infrastructure

development -important input of construction industry- for the country’s socioeconomic growth

second most consumed material on the planet Providing employment to more than a million

people, directly or indirectly attracted huge investments, from both Indian and

foreign investors, making it the second largest in the world

currently in a turnaround phase, trying to achieve global standards in production, safety, and energy-efficiency

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Background accounting for about 8% of the total global production total capacity of over 360 m tonnes (MT) as of financial

year ended 2013-14 cyclical commodity with a high correlation with GDP The housing sector is the biggest demand driver of cement,

accounting for about 67% of the total consumption other major consumers of cement include infrastructure

(13%), commercial construction (11%) and industrial construction (9%)

grew at a commendable rate in the previous decade, registering a compounded growth of about 8%

per capita consumption of cement in India still remains substantially low at about 192 kg when compared with the world average which stands at about 365 kg (excluding China)

tremendous scope for growth in the in the long term SINCE 1881

The Role of Cement Industry in India

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The infra-development of the country is the demand driver for the cement industry

experiencing the entry of many foreign players in the Indian market

The growth rate of the production of cement during the year 2006-07 was 9.1%

The cement industry in India constitutes of 365 small cement manufacturing units and 130 large cement manufacturing units

The total installed capability of the cement manufacturing is 165 million tonnes per year

The large manufacturing units accounts for 94% of the total output of cement

Product & Competitors Cement is a bulk commodity and a low value product It is sold in 50 kg packs as OPC grade 33, 43, and 53 It is used in all construction activities as a primary

constituent of concrete Due to similar raw material inputs and production

processes, there is no significant differentiation in the cement produced across firms

The Indian cement industry has a large number of fragmented firms

There is also a dearth of new players as incumbents have already procured key raw material sources, like limestone reserves on long-term leases

Further, large firms are continuously consolidating by acquiring smaller ones that find it difficult to attain minimum efficient scale of production

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Employment Opportunities

The Indian Cement industry in India consists of organized and the unorganized sector

Organized sector constitutes the cement producing industries while the main players of the unorganized sector are the regional and local cement producing units in various states across the state

Job opportunities are available in organized and the unorganized sector

In most cases, one needs to have some type of expertise in architecture in order to get a job in this sector

There are many opportunities for site engineer, packaging engineer, surveyor, geologist, contractor, supervisor and other posts

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Environmental Issues Greenhouse gas emissions from cement manufacturing

pose a serious environmental threat Currently, the cement industry generates 5% of India's

total carbon-dioxide emissions With stringent emission norms, the production process

needs to be made environmentally sustainable The cost of implementing new production processes that

help reduce emissions can be offset by trading certified emission reductions (CERs)

CERs are a component of national and international emissions trading schemes, implemented through Clean Development Mechanism (CDM) projects, in an attempt to mitigate global warming

Credits obtained through implementation of such projects can be traded in international markets

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Cement Industry - History Firstly in 1889 a Kolkata-based company started manufacturing

cement from Argillaceous Later the industry started getting the organized shape in the early

1900's India Cement Company Ltd was established in 1914 in

Porbandar with a capacity of 10,000 tons and production of 1000 tons installed

The first initial thrust to the cement industry in India was during the World War 1 and then the industry started growing at a fast rate in terms of production, manufacturing units, and installed capacity

This particular stage in the history was referred to as the Nascent Stage of Indian Cement Industry

In 1927, Concrete Association of India was established to create public awareness on the utility of cement as well as to propagate cement consumption.

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Cement Industry - History

The indigenous Indian cement Industry traces its history back to 1914, at a time when the market was dominated by imports

In that first year the industry produced just 1000t of cement, but over just 10 years this figure increased to 0.26Mt in 1924

In the same 10-year bracket, India consumed a total of 2Mt of cement, with around half imported

However, the industry was fighting against poor public perception surrounding not only domestic Indian cement, but cements itself

Many producers went out of business as a result of price-wars between Indian producers who were aiming at a bigger slice of the future marketSINCE 1881

Status of Indian Cement Industry The Industry recorded an exponential growth with the

introduction of partial decontrol in 1982 culminating in total decontrol in 1989

Largest Cement Producing Country in the World, next only to China

The capacity, which was 29 Mn.t in 1981-82, rose to 340 Mn.t at the end of FY12

While it took 8 decades to reach the 1st 100 Mn.t capacity, the 2nd 100 Mn.t was added in 11 years and the 3rd 100 mn.t was added in just 3 years

The industry has around 65 companies having around 200 cement plants

Industry is producing World class high quality& different varieties of cement to suit a host of applications matching the world's best in quality

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Status of Indian Cement Industry Facing a chronic problem of insufficient availability of the main

fuel coal, driving the manufacturers to resort to use of alternatives at steep cost

Taxes and Government levies on cement are high compared to countries in Asia pacific region

branded as the highest polluter of environment, now meets the pollution standards, and no longer a polluter today

Contributes to environmental cleanliness by consuming hazardous wastes like Fly Ash (around 30 Mn.t) from Thermal Power Plants and the entire 8 Mn.t of granulated Slag produced by Steel manufacturing units and also using alternate fuels and raw materials

using advanced and environment friendly technologies Implemented Waste Heat Recovery System for co-generation of

power in cement plants thereby reducing CO2 emission SINCE 1881

Status of Indian Cement Industry As a part of CSR, the Cement Industry takes care of the social

needs not only of the employees in the field of Education, Health, Environment ,Water Supply, Power but also adopts several villages around the factories providing free drinking water, electricity, medical and educational facilities

Cement Industry employs approx 5 lakh people in direct and indirect employment in the country and contributes approx. Rs. 32500-35000 crore annually to the national exchequer through various taxes and levies

Exports Cement/Clinker to around 30 countries across the globe and earns precious foreign exchange.

deserves due support from the Government by avoiding imposition of high levies and duties, making available various inputs like fuel, power, transport etc. at reasonable prices and in required quantities and help its growth and improve competitively both in domestic and international markets SINCE 1881

Market Size

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

To meet the rise in demand, cement companies are expected to add 56 million tonnes (MT) capacity over the next three years

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 top 20 cement companies account for almost 70 per cent of the total cement production of the country

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Investments 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

major investments in Indian cement industry are: Dalmia Cement (Bharat) Ltd has invested around Rs 2,000

crore (US$ 321.12 million) in expanding its business in North East over the past two years

The company currently has three manufacturing plants in the region — one in Meghalaya and two in Assam.

JSW Group plans to expand its cement production capacity to 30 million tonnes per annum (MTPA) from 5 MTPA now by setting up grinding units closer to its steel plants.

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Investments UltraTech Cement Ltd has charted out its next phase of

Greenfield expansion after a period of aggressive acquisitions over the last two years

Following its takeover of two cement plants owned by the Jaypee group, UltraTech has plans to set up two Greenfield grinding units in Bihar and West Bengal, according to Mr O P Puranmalka, MD, UltraTech

JSW Cement Ltd has planned to set up a 3 MTPA clinkerisation plant at Chittapur in Karnataka at an estimated cost of Rs 2,500 crore (US$ 401.55 million)

Andhra Cements Ltd has commenced the commercial production in the company's cement plants – Durga Cement Works at Dachepalli, Guntur and Visakha Cement Works at Visakhapatnam

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Report on ‘Indian Cement Industry Outlook

The Indian cement industry increased in value at a compound annual growth rate (CAGR) of 13.14% during the review period (2007–2011), and is projected to grow at a CAGR of 10.64% over the forecast period (2012–2016)

The Indian government invested US$500 billion on infrastructure during the Eleventh Five-Year Plan (2007–2012) and revealed plans to invest a further US$1 trillion on infrastructure during the Twelfth Five-Year Plan (2012–2017)

Large township projects in the suburbs of India's leading cities where IT zones are prominent are also generating more demand for RMC. Upcoming infrastructure projects, including energy, roads, ports and airport projects, across India will continue to drive the growth of RMC in India over the forecast period

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Latest Developments expected to grow steadily in 2010-2011 and increase capacity by

another 50 million tons in spite of the recession and decrease in demand from the housing sector

project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%

The major companies have made investments to increase the production capacity in the past few months, heralding a positive outlook for the industry

The housing sector accounts for 50% of the demand for cement and this trend is expected to continue in the near future

The Indian Cement Industry with Modernization and technology up-gradation has become a continuous process for industry

At present international standards and benchmarks in the quality of cement and building materials produced are met in India and is able to compete international markets

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Latest Developments

Substantial technological improvements resulting in increased capacity, reduction in cost of production of cement

In 2003, a Cris Infac study mentioned that the cement industry could had the capacity addition of approximately 50 MT by 2008, of which Greenfield expansions would contribute 40 MT while debottlenecking of the plants and increase in blending ratios would add another 10 MT, taking the total capacity of the cement industry to around 180 MT

The industry has a current capacity of 324 MTPA and operates at 75-80 per cent utilisation

The cement and gypsum products sector has attracted foreign direct investments (FDI) worth US$ 2,625.90 million between April 2000 to November 2012, according to the data published by the Department of Industrial Policy and Promotion (DIPP)

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Cement Industry - Future few are betting against continued capacity additions in the

short- to medium-term India Brand Equity Foundation (IBEF) reported that the

cement industry would increase production by around 71Mt/yr over the same time-frame to reach over 300Mt/yr in 2014

12th Five-Year Plan, states that India will require a cement capacity in the region of 480Mt/yr by the end of 2017. It states that a further 150Mt/yr of capacity will be required to accomplish this.

ACC expects India to have a capacity of 500Mt/yr by 2020 The government promises significant investment in

infrastructure, although bureaucracy has hampered such investments in the past.SINCE 1881

Conclusion

The Indian cement industry is large, growing and, with consumption of just 185kg/capita/yr in 2011 (compared to global average of ~300kg/capita/yr) the country itself has the capacity to demand significantly more cement as it develops

However, cement producers are keen to maintain their market share and so expand to secure future demand

The cement industry is experiencing a boom on account of the overall growth of the Indian economy primarily because of increased industrial activity, flourishing real estate business, growing construction activity, and expanding investment in the infrastructure sector

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SUMMARY consolidation over the coming years Producers that can differentiate their cement from others or can

make savings on production costs by their competitiveness Cement demand is closely linked to the overall economic growth,

particularly the housing and infrastructure sector Given the Narendra Modi’s government’s thrust on housing and

infrastructure development, cement demand is expected to pick up in the coming times

The weakness in the international crude oil prices and other commodities should help bring costs under control and improve profitability of the sector

If inflation comes under control, a likely lowering of interest rates would be a big positive for the cement sector

Higher government spending on infrastructure, robust growth in rural housing and rising per capita incomes are likely to augur well for the cement industrySINCE 1881

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