DECONTROL
& ITS EFFECT
By
Dr.D.Sivaprakasam
M.Com.,M.Phil.,B.G.L.,PGDCA.,Ph.D.,Dr.R.A.N.M.
Arts and Science
College, Erode - 638 009
 |
| Dr.D.Sivaprakasam |
That was the product of 40 years of control. In 20 years
of decontrol, the capacity has gone to 330 million tones. If this capacity had
not been added, India’s growth would have been severely constrained. Growth
would have been severely curtailed because the
deficit could not have
been sourced from outside.
GROWTH
OF DEMAND..!
The demand growth was good. There was a 8 to 9% compounded
annual growth for almost 20 years after decontrol. In the last two to three
years, it has become sluggish. It is more pronounced as it came after a high
growth period. It was in this period that India increased its capacity from 17
crore tonnes to 31 crore tonnes, most of this came
from the southern states. This is due to some important facts.
Limestone is
available only in 7 or 8 places in India and 25 per cent of the country’s
limestone is in Andrapradesh. So it is natural that capacity is created only in southern states. This is
the main reason
that there is a situation where the capacity utilization in the south is about
65 to 68 per cent whereas the utilization in other regions is higher.
CAPACITY
CREATION..!
Anticipating a
huge growth in demand, most of the cement manufacturers went in for huge capacity addition over the last five years, only to find that
they were wrong. This is due to the decline in demand for cement all over in
India in general and the southern states in particular.
The mismatch
between capacity created and demand was there in the last year also.
Capacity
creation has been on a large scale and ever since de-control in the 1990’s,
capacity creation is always ahead of demand. However, whatever additional
capacity was created was quickly absorbed.
If it is looked
deeper, it will reveal the fact that Andrapradesh was growing at 24 per cent compounded. This has become
negative now. Similarly, Karnataka has also slowed
down. This has pulled the growth in the south. However, a slow revival is
expected now.
But this depends upon how the economy bounces back and whether the investment
goes into housing and infrastructure which can spur growth.
GROWTH
POTENTIAL..!
Cement is a long
term business. None can look at cement on a quarter-to-quarter basis or a
year-toyear basis. If a 5 to 10 year outlook
is taken
into account, it is outstanding. The cement industry having
crossed control, decontrol etc., has become a building block industry. If
people believe India has growth potential, then it is true that the cement
industry has also growth potential.
In the current
scenario, many cement manufacturers are making
decent profits. Hence. there is no doubt that the cement industry will have a
remarkable growth in future also.
Src: B & C
Publications
No comments:
Post a Comment