Cement economy of India — what ails or hails it

Cement industry in India is booming every year, thanks to the increase in industrial construction and upcoming infrastructure projects in major cities of India. The cement industry has a vital contribution to the Indian economy accounting for 8% to total production in the world. Cement industry stands tall with Indian being the second largest producer of cement in the world.

Cement economy of India is growing by leaps and bounds. Here are the key growth highlights of the cement economy in the recent years –

1. India has witnessed growth in cement industry in the last decade. It has registered a double progress adding 70 million tonnes in the last three years.
2. The growth in cement industry increased by 5.6% YoY in FY 2014–15 as compared to 3.1% YoY in the financial year 2013–14.
3. The demand for cement in India is expected to grow up to 550–600 MTPA by the year 2025. This will be majorly driven by the growth in the housing sector that already contributes to 67% of total consumption of cement in the country.
4. In the sector of infrastructure development which is one of the major consumers of cement, commercial construction stands at 11% and industrial construction occupies 9%.
5. The major contribution to cement economy is made by big 20 companies that account for over 70% of total domestic production. The small companies account for less than 25 % of the production of cement.
6. There are many initiatives by the government that aim to achieve self-sufficiency in cement production. The major plans include increment in infrastructure sector to $ 1 trillion by the government. Another major goal is to increase industrial capacity to 150 MT.
7. The cement industry provides employment to over 1.5 lakh people directly with 209 large cement plants and 365 mini plants.

The Barriers:

1. In spite of growth in cement industry in the last decade, the overall growth has slowed down in the last 4–5 years due to a slowdown in the infrastructure and commercial sectors.
2. The per capita consumption in India is 195 kg which is very low as compared to that of world consumption (520 kg).
3. There is a huge gap between demand and supply, the latter being much higher which should change with the numerous infrastructure projects.
4. High capital and transportation costs prove to be uneconomical especially to the small cement industries.
5. The market share in the cement industry in India is controlled by large players giving very less room for growth to small players making it more consolidated.
6. In the FY 2014–15, slow growth was witnessed in the second half due to less demand from industrial and commercial projects. Also, lack of government initiatives and slow infrastructure revival impacted it badly.

Conclusion:

The increasing demand in cement industry is closely linked to the growth in our economy. While excessive capacity and low demand rate remain a challenge, the subsequent decrease in global crude oil prices are very likely to help the cement economy to turn into a profitable sector.

Originally published at www.ofbusiness.com.