The Indian Cement Industry

India is one of the leading cement producers in the world. It has more than 7% of the world’s installed capacity. India’s infrastructure and construction sectors have a lot of room for growth, and the cement industry is expected to benefit greatly. Some of the most recent initiatives of the government are also expected to give the sector a significant boost.

India is currently the world’s second-largest cement producer after China. The cement industry in India is a vital component of the infrastructure. With the government’s support for various infrastructure projects, the road network, and housing facilities, cement consumption is expected to rise in the coming years. Cement companies are rapidly developing new plants to meet the growing demand.

Understanding how the Indian cement industry works

To understand how the Indian cement industry works, we need to know the two major customer sets:

• The infra customer belongs to the non-trade segment and has lower margins.
• The retail customer belongs to the trade segment and therefore has higher margins.

For a retail customer, the cement industry is a push market industry, meaning whoever is able to sell or push their product successfully will have greater sales. The brands do not usually have much say in the sales. 

Demand and supply are used to calculate the sales price. It’s a market with a constantly changing price structure.

Because cement requires plenty of space, it takes a lot of effort to handle it. As a result, the farther it is transported, the higher the freight and handling costs increase, reducing the manufacturer’s profit.

Indian Cement Industry Analysis

• The cement industry in India is interlinked extensively with the country’s economy.
• The USP of the cement industry is even greater for a developing economy like India, given the ever-growing infrastructure needs of an advanced country, as well as its contributions in terms of direct and indirect employment.
• The Cement Industry in India, which accounts for over 7% of global installed capacity, is the world’s second-largest cement industry, trailing only China.
• It is also the fourth-largest contributor in terms of revenue to the treasury and the second-largest contributor in terms of revenue to the Indian Railways, contributing nearly US$ 7.14 billion (INR 50,000 crore) per annum to the government in the form of taxes and other levies.
• It also contributes about US$ 1.29 billion (INR 9,000 crore) per annum to the Indian Railways through freight.
• The cement industry in India has a total installed capacity of around 545 million tonnes per year, but only 337 million tonnes of cement was produced in 2018-19, indicating a capacity utilisation of around 62%.
• In FY21, India produced 294.4 million tonnes (MT) of cement, compared to 329 million tonnes (MT) in FY20.
• The private sector owns 98% of the total capacity, while the government owns the remaining 2%. Cement production in India is dominated by the top 20 companies, which account for roughly 70% of total output.
• Further Indian Cement Industry Analysis reveals that because of the growing demand from various sectors such as housing, commercial construction, and industrial construction, the cement industry in India is predicted to produce 550-600 MT per annum (MTPA) by 2025.
• In FY21, India produced 294.4 million tonnes of cement, compared to 329 million tonnes in FY20.
• When compared to February 2020, India’s cement production increased by 7.8% in February 2021.
• In FY21, India produced 262 million tonnes of cement overall. In FY22, cement production is expected to rise 10% to 12%, with utilisation hovering around 65%.
• According to Indian Cement Industry Analysis by ICRA, cement production in India is expected to increase by 12% YoY in FY22, owing to a strong government focus on infrastructure development and rural housing demand.
• Increased infrastructure spending in FY22 budget estimates—34.9% for roads, 8.7% for metros, and 33.6% for railways—is expected to boost cement demand.
• Following the COVID-19 pandemic, growth in the infrastructure and real estate sectors is expected to boost cement demand in 2021. An Indian cement industry analysis predicts that cement production capacity is expected to increase by 8 MTPA.

Conclusion

The cement industry is the foundation and the binding force for all infrastructure projects, including roads, bridges, housing, sanitation, and water conservation, thanks to its essential characteristics. Promoting sectoral growth is critical for increased investments and capacity additions in the context of the country’s long-term development.