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Poor demand and cost escalations hit the Indian cement industry

Cement – the binding agent that is mixed to the concrete for constructions - is essential in nature. Cement is one of the industries that plays pivotal role in the growth and development of a country.

At present, cement industry in India holds the second spot in the global cement market, with total installed capacity of 33O MTPA! Over the years, it has successfully crossed many hindrances and transited itself into an advanced industry that churns out a range of products for various applications such as roof construction and railway sleeper manufacturing. Of late, however, some new challenges have begun to appear on the surface.

Muted growth and rising input costs are hitting the cement players hard. The industry is facing overcapacity, whereas demand is not very encouraging. The disturbing economic conditions in the country are the main reasons behind this disparity between demand and supply of cement products in the country. Demand for cement from the housing builders and infrastructure services providers has sharply gown down on the back of inflation, adding to the trough in the cement industry. And the demand is not likely to go up any time soon.

The continuous rise in the costs of raw materials – particularly gypsum, fly ash and slag – is also being seen as a challenge in cement production or how is cement made.

The process – of how is cement made – typically begins in a cement manufacturing plant, where raw materials – limestone and clay – are processed for clinker. Clinker – granular cement – is then taken to a cement grinding mill, where it is grinded to fine cement power, which is then packed in bags and transported throughout the country.

Increase in diesel prices and rail freight has caused the logistics costs go up by 22 per cent; this cost will also be borne by cement companies. Recent fall in coal prices, however, is coming as good news for the industry. But, this fall alone can’t help the industry get back on the track; even the tax policy in the country – that governs the industry - needs to be amended so that cement companies can erase some of the pressure that’s been mounting on them.

The ailing industry can also benefit from measures like consolidations. Large scale consolidations will help the industry explore new markets, be more competitive in its pricing and take on the foreign players more effectively. Government support can infuse a whole new confidence in the industry.

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Cement industry in India ranks second in global cement production. However, the industry is not seeing any substantial growth in demand from the housing and infrastructure services sectors. To emerge successfully from this situation, the cement companies need adequate government support and innovation in how is cement made. For example, cement major Dalmia Bharat Cement went out of its way and set-up its own research & development center along with technical mobile labs to evolve and improvise concrete and cement.

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