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Liberalization & its impact on the Cement industry
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As of now, the industry looks forward to a revision of the high interest rates, rationalisation of imposed taxes, including excise and sales tax, and a series of confidence-building measures on the part of the government for sustained growth of the industry.
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B K Singh, Executive Director - Group Marketing & Corporate Communication
at Dalmia Bharat Enterprises, has been in sales and marketing all through out his professional career. An engineer with post graduation in International business, he has worked with leading FMCG companies and is currently involved in a challenging task of transforming the business. His immediate goal is to transform the organisation from a leading regional player to one of the top five Pan India Players in the Cement Industry. Along this journey, his task remains to help elevate the industry from the current basic price led commodity industry to one that is end consumer focused with strong brands. Examples available are like - Paints, Tiles and Sanitary wares.
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As India stakes claim to a position of global eminence, rapid economic and industrial growth will be the key factors that will ensure that the quality of life enjoyed by Indians is comparable to that of the developed nations. Inclusive growth that permeates across every strata of Indian society will remain the goal for the nation in the foreseeable future.
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Cost escalation and impact on Dalmia Cement price |
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2008-09 (In Rs /tn
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2011-12 (In Rs /tn)
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Increase %
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Limestone Royalty |
46
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64
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17.00
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Coal |
2,647
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3,814
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44 .00
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Slag |
429
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758
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76.70
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Gypsum |
1,379
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1,851
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25.50
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Employee Cost |
148
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173
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17.00
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Cement (Selling Price/tn) |
3,108
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3,509
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12.90
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Among different industries in India, given the vast geographical size of the country and the construction activities undertaken by both the government and the private sector, the Cement industry has seen rapid growth. The need to provide housing for more than a billion Indians added further to the growth story of the Cement sector. One of the reasons driving this growth has been the process of liberalisation, which saw government relinquishing control on pricing and distribution in 1989, followed by de-licensing in 1991. This had a definite impact on the industry with 100 million tonne of capacity addition being witnessed during the decade from 1999 to 2009. Today, India's share in the worldwide cement production pie is about six per cent, and it is second only to China in overall cement production.
As per the Department Related Parliamentary Standing Committee on Commerce's Ninety Fifth Report on the performance of the cement industry, India currently has approximately 154 large cement plants with an installed capacity of 230.82 million tonne, employing 1.35 lakh workers directly.
Sustaining Growth
While the industry witnessed rapid growth from 1999 to 2009, the last couple of years have been a period of high interest rates and subdued growth. While inflationary pressures riding on the high prices of coal and other vital ingredients have remained high, the industry has desisted from passing on the price hikes to the customers. Undoubtedly, this has led to a situation of low demand, low capacity utilization and slow completion of projects.
As of now, the industry looks forward to a revision of the high interest rates, rationalisation of imposed taxes, including excise and sales tax, and a series of confidencebuilding measures on the part of the government for sustained growth of the industry.
Green Manufacturing
While sustained growth is critical, a word of caution is due here. As India looks to strengthen its Cement industry and rise out of a period of high interest rates and subdued growth, a critical element will be sustainability. While economic liberalisation in the early nineties paved the way for the industry's growth, adoption of sustainable manufacturing will secure long term goals of social change and economic prosperity.
What makes sustainability critical is the fact that, today, the demand for concrete is second only to that for water. Add to this, the fact that nearly five per cent of global greenhouse gas emissions are being attributed to the Cement industry, and it becomes obvious that there is a need to implement measures and techniques that aid green manufacturing. A concerted effort must be made to ensure that manufacturing processes at every stage reduce harmful emissions. As the industry expands, conscious efforts must be made to reduce heat, noise and air pollution, which in-turn will make for a cleaner and greener Cement industry.
How can the Cement industry reduce its carbon footprints? A good first step would be to employ efficient technology like dry processing plants. Use of captive power plants also increases electrical efficiency. Secondly, the industry can look towards reducing the usage of clinker in the production process by substituting it with fly-ash, slag or other similar substances. Thirdly, alternative fuel sources like biomass maybe a great way to reduce the dependence on fossil fuels and the consequent damage to the environment. Lastly, technologies and methods for carbon capture and storage must be implemented.
These steps once implemented will greatly complement the overall growth plans of the Cement industry. Undoubtedly, the planet will also be a greener place to live in for our coming generations.
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