Wednesday, January 20, 2021

Cement & Concrete

India needs a lot of cement and the continuation of the growth story is inevitable 


AMCL Machinery Limited is a group company of Hindustan National Glass Industries Limited, a leading manufacturer of container and float glass in the country. The Mumbai headquartered firm is a complete solutions provider in optimisation and upgradation of projects related to cement plants. The company is in the business of design, manufacturing, supply and installation of Vertical Roller Pre-Grinding Mill, Tri-Lobe Blowers. It also manufactures a complete range of rubber and tyre machinery. To cater to the need of various RMC segments AMCL manufactures bulk handling systems and transit mixers. All the equipment manufactured at AMCL is in technical collaboration with various reputed Japanese manufacturers. AMCL's state-of-the-art manufacturing facility at Butibori near Nagpur includes imported machining centres as well as other high precision machinery, housed in a covered factory area of 5000  RAKESH SHARMA, DIRECTOR, AMCL MACHINERY LTD offered SHRIKANT RAO his perspective on the state of India’s cement sector and its fortunes post the parliamentary elections. 



Briefly give us an overview of the cement sector in India and the current market dynamics?


The cement sector in India is in an over capacity situation. We are at almost 330 million tone capacity. During the time of the India growth story in 2008-09, we were expecting India’s GDP to be 7-8 per cent, even more. We were thinking that India too like China would see a similar high growth. In anticipation of that situation many players had opted for expansion of cement plants They was order booking for 25 million tonne per annum capacity plants, new orders were placed for power plants, infrastructure projects were announced. The situation prevailed for 2-3 years during which time things were looking bright, the cement manufacturers were happy because they were getting a lot of orders and expectations were very high. But once the plants were at the commissioning stage we found out there was no offtake. The growth suddenly slowed down due to government policies.  Presently there is no demand for cement, and not at the pace we were expecting.  The cement consumption growth had fallen down to around 4.5 per cent – which had never happened earlier. The average compounded rate of growth in India till then was 8 per cent. We were hoping that with the thrust given to infrastructure projects the cement sector would grow at the rate of 10 per cent, if not 11 per cent. Normally in the case of countries passing through development activity phases it should be 10-11 per cent.  For instance, in the case of China it was nudging 11 per cent and it saw a phenomenal increase in cement plant capacity. It is currently almost 2 billion tonne in China as against India’s 330 million. Today there are no infrastructure projects; no power plants coming up; the number of steel plants is less. There is sluggishness because projects are not cleared be it over lack of environmental or land acquisition clearances, absence or shortage of water or other resources, or even finances.  There is hardly any increase in consumption demand. Housing has picked up to some extent but not to the levels we were expecting. The result is that cement plants are operating at 65 to 70 per cent capacity. North India is better, the East is doing relatively well – it is even picking up but the South is in bad shape because the number of cement plants there are more and the demand is low. The worst affected region is the Hyderabad region where there a lot of cement plants – it is regarded as the cement bowl of India.  The position today is such that our growth rate hovers around 4.85 per cent. However we feel that once a stable government is in place after the elections things will get back on track. Remember the entire elections are being fought on the developmental plank and the issue of growth; in terms of job creation and industrialisation. So, whoever comes to power would have to fast track projects. That would be good news for the cement sector.



You are suggesting inevitability to the increase in cement usage?


Yes, even if we assume that there is 8 per cent growth rate for the next 7 years the present capacity of 330 million tonne should be doubled. On an average we need to put 25 to 30 million tonne per annum additional capacity. India needs a lot of cement and the continuation of the growth story is inevitable.



At what point do you think things will even out?


I believe things should even out in the next two years time in terms of extra capacity. Today the extra capacity is 90 million tonne and we are sitting at a production of 330 million tonne. If the growth rate is 10 per cent in the next 2-3 yeas this extra capacity will disappear.



Is there an export market India should be looking to tap to address the low domestic off take?


The export market at the moment is not so bullish. There is a lot of demand in the Middle East and in Africa and we can divert our cement there. The other areas are Bangladesh and Nepal where cement or clinker is exported. There are plants in Gujarat like Ultratech’s Narmada and the Sanghi Cements plant which have been set up for the exports market. Increasing exports will not help much. There is so much of cement required here in India. There are so many infrastructure projects in the country's metros which require cement. Every city requires a metro and other transport infrastructure. In Mumbai we are slow in putting up a metro or bridges to decongest the city. We need new airports. There is no dearth of cement usage opportunity.  The fact remains that India has to grow. If the installed capacity in China is 2 billion tonne, considering the size and population of our country we feel it should be at least 50 per cent of that in the next few years – that is a reasonable expectation. As it is we are at least 15 years behind China in terms of growth rate. There is huge scope for expansion and increase in capacity.



What are the ‘must-do’ steps for the government to take to ensure that this happens? 


The government’s thought process is right. Our five year plan envisages a $ 1 trillion investment – that is a quantum leap in investment from the point of view of infrastructure projects. The question is: How serious is the government to implement those projects, give clearances. We expect the government to be focused on infrastructure while simultaneously taking care of environmental protection issues. The government has made policies now on land acquisition but state support is necessary in procuring the land. It must work with the industry to ensure project clearances, environmental and land procurement takes place in time. Emphasis must be given on skill development – particularly technical and other training – to people in areas where displacement has taken place. There should be technological upgradation. For that and more educational institutes have to be set up. On infrastructure projects the government has to take the lead in involving public and private sector participation. This will lead to more industries, housing, besides offering more employment. In the final analysis it will contribute to increase our GDP growth.  That is what the development sector, of which the cement industry is such an integral part, expects.




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