Cement Industry

By Ismat Sabir

In the Budget 2004-05, the government did not reduce the expected Rs 250 per
metric tonne (MT) in central excise duty (CED) (12.5 per bag). This may have an
impact on the cement sector in two ways: it is expected that cement demand will
grow in future but the rate is likely to taper off from 13 percent to single digit, or the
manufacturers may raise cement prices, which may negatively affect the prospects of
cement demand in future.

Domestic manufactures were hoping to retain a portion of the incentives justifying

the high cost of coal for next year (up 100 percent YoY, US$70 per tonne from US$35
per tonne). But, with higher coal prices, now either manufacturers absorb the hit;
negative for YoY bottom line growth, or they will face reduction in demand.

With the resurgence in demand, improvement at the retention level, coal conversion
and debt restructuring, cement industry has entered the era of improving
profitability. With growth of the economy being linked to infrastructure development,
special emphasis was being paid to the construction sector. The prospects of
economic growth and construction sector are being linked to each other.

During the fiscal year ending June 30, 2003 the industry had suffered a loss of Rs88
million and it operated only at 66 percent of the installed capacity. In comparison, it
earned a net profit of Rs 2,000 million during six months of the current fiscal year
i.e. July-December2003.

Present Position

Cement Production in 1995-96 is estimated at 9.403 million tonnes as

compared to 8.420 million tonnes in the preceding year. The present installed
capacity of 22 cement plants (17 private and 5 public sector) is 10.492
million tonnes. Total production of these plants was estimated at 8.544
million tonnes in 1994-95. As many as eleven new cement plants are being
planned or implemented all in the private sector. The capacity of these
projects is estimated at 12.988 million tonnes. The existing plants have also
planned to expand their capacities. This worked out to 5.070 million tonnes.
Thus the total capacity of cement projects, existing and upcoming would be
as ...