Total production

The cement industry comprises of 125 large cement KPMG Consultancy Pvt. Ltd. The report submitted by
plants with an installed capacity of 148.28 million the organization has made several recommendations
tonnes and more than 300 mini cement plants with for making the Indian Cement Industry more
an estimated capacity of 11.10 million tonnes per competitive in the international market. The
annum.  recommendations are under consideration. 

Cement industry has been decontrolled from

The Cement Corporation of India, which is a Central price and distribution on 1st March 1989 and de-
Public Sector Undertaking, has 10 units. There are 10 licensed on 25th July 1991. However, the
large cement plants owned by various State performance of the industry and prices of cement are
Governments. The total installed capacity in the monitored regularly. Being a key infrastructure
country as a whole is 159.38 million tonnes. Actual industry, the constraints faced by the industry are
cement production in 2002-03 was 116.35 million reviewed in the Infrastructure Coordination
tonnes as against a production of 106.90 million Committee meetings held in the Cabinet Secretariat
tonnes in 2001-02, registering a growth rate of under the Chairmanship of Secretary (Coordination).
8.84%. Major players in cement production are The Committee on Infrastructure also reviews its
Ambuja cement, Aditya Cement, J K Cement performance. 
and L & T cement. 
Technological change
Apart from meeting the entire domestic demand, the Continuous technological upgrading and assimilation
industry is also exporting cement and clinker. The of latest technology has been going on in the cement
export of cement during 2001-02 and 2003-04 was industry. Presently 93 per cent of the total capacity
5.14 million tonnes and 6.92 million tonnes in the industry is based on modern and environment-
respectively. Export during April-May, 2003 was 1.35 friendly dry process technology and only 7 per cent
million tonnes. Major exporters were Gujarat Ambuja of the capacity is based on old wet and semi-dry
Cements Ltd. and L&T Ltd.  process technology. There is tremendous scope for
waste heat recovery in cement plants and thereby
The Planning Commission for the formulation of reduction in emission level. One project for co-
X Five Year Plan constituted a 'Working Group generation of power utilizing waste heat in an Indian
on Cement Industry' for the development of cement plant is being implemented with Japanese
cement industry. The Working Group has assistance under Green Aid Plan. The induction of
identified following thrust areas for improving advanced technology has helped the industry
demand for cement; immensely to conserve energy and fuel and to save
materials substantially. 
i. Further push to housing development
India is also producing different varieties of cement
programmes;
like Ordinary Portland Cement (OPC), Portland
ii. Promotion of concrete Highways and roads;
Pozzolana Cement (PPC), Portland Blast Furnace Slag
and
Cement (PBFS), Oil Well Cement, Rapid Hardening
iii. Use of ready-mix concrete in large
Portland Cement, Sulphate Resisting Portland
infrastructure projects.
Cement, White Cement etc. Production of these
varieties of cement conform to the BIS
Further, in order to improve global competitiveness Specifications. Also, some cement plants have set up
of the Indian Cement Industry, the Department of dedicated jetties for promoting bulk transportation
Industrial Policy & Promotion commissioned a study and export. 
on the global competitiveness of the Indian Industry
through an organization of international repute, viz.
Cement industry growth rate hits 5-year lows
Chandan Kishore Kant / Mumbai April 10, 2009, 0:45 IST

The growth rate of the domestic cement industry has hit a five-year low, in terms of both production and despatches,
in FY09. The industry registered a growth of 7.75 per cent and 7.91 per cent in production and despatches
respectively.

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The overall production during 2008-09, as per the provisional data available from the Cement Manufacturers'
Association, was 181.35 million tonnes against 168.31 million tonnes last year. Despatches grew to 180.95 million
tonnes compared with 167.68 million tonnes in the previous year.

Amrit Lal Kapur, managing director of Ambuja Cements, said, "It is a respectable performance by the cement industry
in a scenario where other sectors have been affected by the slowdown. The industry has not performed too badly
looking at the GDP. Moreover, the lower growth rate is also due to a large base that we had last year."
 

BASE EFFECT
Production and despatches data for the last five years
 Production  Growth % Despatches  Growth % 
Year
(mntonnes)  (y-o-y)  (mn tonnes)  (y-o-y) 
2004-05 127.57 8.57 127.14 8.45
2005-06 141.81 11.16 141.57 11.35
2006-07 155.66 977% 155.26 9.67
2007-08 168.32 8.13 167.69 8.01
2008-09* 181.35 7.75 180.95 7.91
* Provisional figures, Source : Cement Manufacturers' Association

In 2003-04, the industry witnessed a production growth of 5.52 per cent and a despatches growth of 5.55 per cent.
Since then, both the figures have remained above 8 per cent.

The lows of FY09 is despite the fact that March saw historical highs in production and despatches of over 18 million
tonnes. The month outperfomed the other two months of the fourth quarter of FY09 by registering a production
growth of 10.07 per cent and despatch growth of 10 per cent, the highest during the same month in the last three
years.
 The domestic cement industry has failed to keep pace with the production target set by the working group on cement
industry for the current Five-Year Plan (2007-12). The industry produced 8.2 per cent less than the target of 197.51
million tonnes for 2008-09.

The working group had estimated the GDP growth rate at 9 per cent and cement demand growth at 11.5 per cent
before setting the production target.

Interestingly, the industry could not even manage to meet the production target of 192.66 million tonnes, which was
set considering the low growth demand scenario. Last year too, the industry could not come anywhere close to the
target set by the working group.

Industry analysts said that growth rate of below 8 per cent was “in line with the expectation, which is going to fall
further in the present financial year to around 6 per cent.”

Since, the cement industry growth is in tandem with the GDP growth with a factor of 1.2x, this decline in overall
industry's performance was anticipated, they added.

The last fiscal saw demand slowing down to as low as 4 per cent in the month of October. Before that, it oscillated
between 6 per cent and 9 per cent.

It was only in November that the growth factor set in and demand remained consistently above 8 per cent and rising
up to as high as 12 per cent in December last year.

Amrit Lal Kapur, managing director of Ambuja Cements and a veteran in the domestic cement industry, told Business
Standard, "It is quite a respectable performance of the cement industry in a scenario where other sectors are being
affected by the slowdown in economy. The industry has not performed too badly looking at the GDP. Moreover, the
less growth rate is also due to the large base that we had last year."

Fast rising Government Expenditure on Infrastructure sector in India has resulted a higher demand of cement in the
country. In the same direction, participation of larger companies in the sector has increased. 

For raising efficiency in the sector, the Planning Commission of India in the 10th plan has formed a 'Working Group
on Cement Industry'. 

There is a total number of 125 large cement plants and more than 300 small cement plants operating in India
presently. 

ndian Cement Industry Expects to Grow Steadily in 2009

May 15, 2009
India’s cement industry is steadily growing and is set to add on 50 Million Tones additional capacity during
the current year as the demand still remains high.

The Indian cement industry will continue to show steady performance by increasing its capacity another 50 Million
Tones in 2009 despite the recession and slump in the country’s housing industry, stated H M Bangur, President of
Cement Manufacturers’ Association (CMA) and reported by economictimes.

While the construction sector has got deeply affected by the global crisis, the cement sector is improving day-by-day,
recording a YOY growth of 9.4% in the fourth quarter of FY09. The cement prices are also shooting up. The
Association has predicted that the cement sector will grow by 9-10%, provided the GDP of the country grows at the
rate of 7%. 
According to a new RNCOS report “Indian Cement Industry Forecast to 2012”, India ranks second worldwide in the
cement production after China. The Indian cement industry is continuously expanding, with rising production capacity
of major players in the past few months. This indicates to no impact of recession on the industry. 

Moreover, the cement production and consumption are expected to grow rapidly during 2009-2012. Housing industry
makes up for over 50% of the cement consumption in India and the same trend is expected to continue in coming
years, says the report.  

However the government took some infrastructure initiatives, but they proved inadequate. The construction sector is
severely hit by the increase in prices of cement, which were driven by the rise in demand due to the infrastructure
projects of the public sector. 

Although the manufacturing sector registered slow year-on-year growth, some of the sectors, such as the cement
industry, displayed a fractional upturn during the later six months of FY09 as compared to the first six months. 

According to a Research Analyst at RNCOS, “The Indian cement industry is expected to grow rapidly in coming years
due to heavy demand from housing, retail and infrastructure industry. Moreover, several players have decided to
raise their production capacity during 2009-2012, which, in turn, boosts the production volume of the cement industry.
Last Updated: August 2009

 
Sector structure/Market size

India is the world's second largest producer of cement after China, with cement companies adding nearly eight million tonnes
(MT) capacity in April 2009, taking the total installed capacity to 219 MT. A few of the leading manufacturers are the
UltraTech/Grasim combine, Dalmia Cements, India Cements, Holcim etc.

With the boost given by the government to various infrastructure projects, road networks and housing facilities, growth in the
cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, Minister of State, Ministry of
Commerce and Industry, cement production could rise to 236.16 MT in FY11 and touch 262.61 MT in FY12.

With almost total capacity utilisation levels in the industry, cement despatches have maintained a 10 per cent growth rate. Total
despatches grew to 170 MT during 2007–08 as against 155 MT in 2006–07.

Moreover, cement despatches were 15.95 MT in July 2009, showing a growth of 9.92 per cent as compared to 14.51 MT in July
2008. During July 2009, cement production was 16.23 MT, registering a growth of 10.63 per cent as compared to 14.67 MT in
July 2008. Between April to July 2009, cement production totaled 66.38 MT while cement despatches totaled 65.80 MT.

Technological change

Continuous technological upgrading and assimilation of latest technology has been going on in the cement industry. Presently, 93
per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology and only 7 per
cent of the capacity is based on old wet and semi-dry process technology. There is tremendous scope for waste heat recovery in
cement plants and thereby reduction in emission level.

New Investments

 JSW Cement, part of the OP Jindal Group, plans to set up cement units near the group’s steel plants at
Kurnool, Andhra Pradesh, and Vijayanagar, Karnataka. The units which will have a combined capacity of 5.5
MT per annum will be set up at a cost of US$ 393.1 million.
 Anil Ambani Group company Reliance Infrastructure will invest US$ 2.1 billion to set up cement plants with a
total capacity of 20 MT per annum over the next five years.
 Reliance Cementation, an Anil Dhirubhai Ambani Group (ADAG) company, plans to set up a 5 MT
integrated cement plant in Yavatmal district of Maharashtra at a cost of US$ 463.2 million.
 Jaiprakash Associates Ltd has inked a MoU with state-owned Assam Mineral Development Corporation
Limited (AMDC) for setting up a 2 MT per annum capacity cement plant at an estimated cost of US$ 221.36
million.
 Iron ore mining firm Rungta Mines (RML), the flagship company of SR Rungta group, plans to set up a one
million tonne cement plant in Orissa with an investment of around US$ 123 million.

Mergers and Acquistions (M&As)

 Holcim strengthened its position in India by increasing its holding in Ambuja Cement from 22 per cent to 56
per cent through various open market transactions with an open offer for a total investment of US$ 1.8
billion. Moreover, it also increased its stake in ACC Cement with US$ 486 million, being the single largest
acquirer in the cement sector.
 Leading foreign funds like Fidelity, ABN Amro, HSBC, Nomura Asset Management Fund and Emerging
Market Fund have together bought around 7.5 per cent in India's third-largest cement firm, India Cements
(ICL), for US$ 124.91 million.
 Cimpor, the Portugese cement maker, paid US$ 68.10 million for Grasim Industries' 53.63 per cent stake in
Shree Digvijay Cement.
 CRH Plc, the world's second biggest maker and distributor of building materials, acquired a 50 per cent
stake in My Home Industries Ltd for almost US$ 372.64 million.
 Vicat SA, a French cement maker acquired a 6.67 per cent stake in Hyderabad-based Sagar Cement for
 US$ 14.35 million.

Government Initiatives

Government initiatives in the infrastructure sector, coupled with the housing sector boom and urban development, continue being
the main drivers of growth for the Indian cement industry.

 Increased infrastructure spending has been a key focus area over the last five years indicating good times
ahead for cement manufacturers.
 The government has increased budgetary allocation for roads under National Highways Development
Project (NHDP).
 Appointing a coal regulator is looked upon as a positive move as it will facilitate timely and proper allocation
of coal (a key raw material) blocks to the core sectors, cement being one of them.

Keeping in mind the global meltdown which is impacting the cement companies in India, the government re-imposed the
counter-veiling duty (CVD) and special CVD on imported cement in January. This is likely to provide a level playing field to
domestic companies.

Road Ahead

According to a report by the ICRA Industry Monitor, the installed capacity is expected to increase to 241 MTPA by FY 2010-
end. India's cement industry is likely to record an annual growth of 10 per cent in the coming years with higher domestic demand
resulting in increased capacity utilisation.

Moreover, according to the Centre for Monitoring Indian Economy (CMIE), cement production is expected to grow by 8.1 per
cent and demand for the same is likely to rise by a healthy 7-7.5 per cent in FY 2009-10.

Exchange rate used:

1 USD = 48.57 INR (as on July 2009)
1 USD = 48.82 INR (as on Auguast 2009)

The Planning Commission for the formulation of X Five Year Plan constituted a 'Working Group on
Cement Industry' for the development of cement industry. The Working Group has identified
following thrust areas for improving demand for cement;

i. Further push to housing development programmes;

ii. Promotion of concrete Highways and roads; and
iii. Use of ready-mix concrete in large infrastructure projects.

The planning commission for the formulation of X five year plan constituted a “Working Group on Cement
Industry” for the development of cement industry. The working group has identified following thrust areas
for improving demand for cement :

i. Further push to housing development programs.

ii. Promotion of concrete highways and roads.
iii. Use of ready-mix concrete in large infrastructure projects.