INDIAN CEMENT INDUSTRY CURRENT SCENARIO.!

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

 From Independence till the year 1989, when cement was under price and distribution control by the Government, the capacity created in the country was hardly anything. Capacity in the year 1988 was around 45 to 50 million tonnes.

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

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