The growth of the cement industry in India has been directly proportional to the nation’s economic and infrastructural growth. The constant buildup of governmental infrastructure projects as well as quality policy guidelines has aided its growth.
The demand for cement in the nation for over two decades, according to statistics, has been spurred by the constant drive of infrastructure as well as projects that took longer periods of time to complete.
Overview
India, as of 2016, became the 2nd largest player in the cement industry globally, with China’s cement industry being about 10 times bigger in terms of output. The total production of cement recorded by India was about 425 million tonnes and it contributed to its position in the world’s cement market.
A general overview of the structural capacity of the nation’s cement industry accounts for over 350 million tonnes by 210 large plants and about 11.10 million tonnes by 350 mini cement plants.
The cement industry experienced a series of setbacks as the demand for cement weakened sharply over the years. There was a marginal increase of 5.4 percent within 2011-12 and 2015-16. However, it experienced another rapid decrease of 1.2 percent in 2016-2017. 2017-18 witnessed just a marginal increase.
The thrust of housing projects which has seen the cement industry through constant and rapid demand experienced a sporadic decline, and that was cited as cause for the wavy growth.
The ban placed on sand mining and use of pet coke for cement production was quoted as a major challenge faced by the industry. The year also experienced a reduction in the market concentration of the industry’s top players and investors.
One of the greatest challenges faced by most industries is the risk of a higher rate of goods and services tax (GST). The cement industry seems to be the only industry in juxtaposition to the highest GST rate slab.
Therefore, this means that the risk of a higher GST rate is eliminated. However, a change in the GST rate could affect cement demand. This, of course, explains that an increase in the tax rate would mean an increased cost of infrastructure in the housing sector.
Lower GST Expected for Optimum Improvement
The volatility of market structures has prepared the cement industry for contingency. The expansion of the industry especially the mini cement plants into larger plants for the production of higher tonnes of cement to meet the rising infrastructural development has been in place in the last five years.
With the overview of the increase and decline in demand of cement in India, it was inferred that the creation of avenues for demand in the real estate sector albeit with affordable housing projects and the incentive for public-private partnerships (PPP) would aid the rise in demand.
Since some of the impediments encountered by the industry especially mini cement plants remain demonetization, integration of GST and Real Estate Regulation and Development Act (RERA), it is expected that a decrease in the GST would work in the decrease in services rendered. This would help the market value of the nation’s infrastructural projects retain an affordable value.
Cheaper Inputs Expected in Form of Duty Structure for Refractory Industry
The refractory industry is one of the core players in India’s financial sector and is one of the movers in the cement industry as they work hand-in-hand. The refractory industry expected that the notion of the necessary changes in the duty structure for cheaper inputs would be addressed. These inputs were to be made cheaper as opposed to the imports of raw materials which increase the cost of labour and finished products.
The chain of production for cement industries involves the use of line kilns and furnaces but the financial woes of the refractory industry clients seem to have added to the decline in the financial state of the industry.
Therefore, the refractory industry expected that there would be proper policies put in place so that the industry could benefit from any rise in demand.
Real Estate and Budget Organise and Suggest Ways to Boost Cement demand
Quite a large number of suggestions have been submitted to the government on fiscal measures as well as proper implementation of ways of increasing the market demand for cement.
The real estate industry looked forward to a reduction in tax rates as a break for the industry along with lower building rates.
The government has however taken the budget exercise which entailed higher expenditure on projects for utmost results. This is said to be one of the most effective ways for increasing the demand of cement, especially for the buildup of mini cement plants on the rise.
Economic Growth
The constant rise in structures put in place will serve to improve India’s financial and economic growth. This incentive, which includes the increase in cement demand, can serve as a job creation opportunity. The government has taken up methods of programming the benefits of infrastructural changes to other vulnerable structures in the nation.