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Cement awaits huge investment dose

Mumbai, May 4: India will need an additional capacity of 330-380 million tonnes (mt) for cement and 240-270mt for clinker by 2025, which translates into an investment of Rs 3 lakh crore to meet the sharp increase in demand by this period.

The Indian cement industry is the second largest in the world with total production at around 221mt in 2012. However, the country fares poorly in terms of cement consumed per capita compared with other peer economies.

According to a CII-AT Kearney Study on “Cement Vision 2025: Scaling New Heights”, demand is projected to grow 2.5-2.7 times the current volume and reach 550-600mt per annum by 2025.

Per capita consumption is also likely to increase to 385-415kg from 185kg. This growth, the report said, is likely to be led by investments in the infrastructure sector, with sub-sectors such as roads, power and irrigation leading the charge.

However, an unattractive tax and infrastructure environment may stand in the way of the required investment of Rs 3 lakh crore.

The report observed that in addition to policies that encourage companies to bring in such investments, continuous improvement will have to be made to strengthen the industry’s operating cost structure by increasing automation and improving efficiency in power use.

Besides witnessing slack demand in the last couple of years, the domestic industry has seen a rise in supply-side problems.

The study said the share of coal in overall energy use declined to 35 per cent in 2011-12 from 65 per cent in 2005-06, leading to increased dependence on alternative sources.

“The need for quality logistics infrastructure (especially the railways), a shortage of skilled construction labour, and delays in getting land and environmental clearances make setting up much-needed additional capacity difficult,” the report stated.

“These factors, combined with the higher costs of fuel and financing, have put enormous pressure on the cost of cement manufacturing, which has risen 8 per cent annually during the past four years, despite the achieved efficiencies.”

 
 
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