Vinita Singhania, Managing Director, JK Lakshmi Cement, believes that the cement demand will dramatically increase from Tier II and II cities and even rural markets. However, the slip between on-paper development and actual implementation of projects, often held up by non-clearances, is misleading, she tells Sumantra Das.
The year 2012 has been volatile for cement industry and most of the players predicted marginal growth in 2013. What are the major reasons behind it? The muted growth was mainly attributed to the slowdown in construction activities. Besides, there were reasons like extended monsoon, delays in infrastructure projects and overall downturn in the economy. Thus, the capacity utilisation levels were very low (at 74 per cent). Moreover, the industry also witnessed a very high operating cost, particularly in freight. Also, prices of imported coal went up sharply. Further, it aggravated with increased railway freight and the road transport charges. Both these triggered the high operating costs.
Can we see any correction in demand in the near term? I strongly believe that the cement demand will increase gradually and it should. Actually the market outlook for the fiscal year 2014 is very positive and we are expecting that will improve. However, there are factors like government initiatives. If the government is taking key initiatives for the revival of Indian economy in general and infrastructure in particular, the cement demand and industry will grow simultaneously.
How do you see the demand from smaller cities and rural market? We are hopeful on demand growth from Tier-II, Tier-III and even from rural market. It has increase dramatically as a lot of construction work is happening in these places. However, we do not have any concrete data on rural demand but with whatever data we have, we found there is a lot of potential for demand growth from these markets. So, one must need to understand the capacity utilisation in the cement industry that could only recover with an increase in demand from real estate and construction, be it in urban or rural.
What issues need immediate attention? Firstly, interest rate has to come down and the government should take some more active steps to at least get the infrastructure in place. As I said, the Dedicated Freight Corridors (DFCs), upgradation of airports, and road building activity should have fast track clearance, which indirectly helps to boost up cement demand. On paper, there are a lot of developments happening but actually implementation is not taking place as issues such as environment, land and many more other issues are hampering execution.
Do you think that manufacturers are positive on investment in capacity building? Of course. The sentiments for future investment will remain as 12th Five Year Plan highlighted various infrastructure projects which will require more cement. If the government is focused and they do all what they have said, I think the industry will add more capacity than before.
Is industry adopting automation to curb issues like manpower shortage and rising input cost? Yes, the industry has to adopt automation. The cement industry is facing a huge manpower shortage to run its business. So, we have to depend on automation. However, in automation also we can only go to a certain extent as we cannot do cement plant with 100 per cent automation.