There is a huge potential to enhance our cement consumption

Consumption of cement can be enhanced by giving major thrust for the development of infrastructure apart from providing a level playing field with the global cement exporters by re-imposing the basic import duty on cement, presently zero, says NA Vishwanathan, Secretary General, Cement ManufacturersÂ’ Association, in an interview with Sumantra Das.

The year 2012 has been volatile for cement industry and most of the players predict a marginal growth in 2013. What strategies does the industry need to take to combat the situation?
It is not just the year 2012 but even 2010, 2011 and the current year too have been volatile for the cement industry when its growth has been hovering around 5 per cent from an average growth of 8-9 per cent owing to the overall deceleration in the economy and also severe downfall in the construction activities. This has resulted in a sharp drop in the capacity utilisation of the industry.

The reasons for the dismal growth of the industry have not only been acknowledged and appreciated by the Working Group on Cement Industry for 12th Plan in its report submitted to the Planning Commission in December 2011 but it has also strongly advocated to the government construction of techno-economically superior cement concrete roads and white-topping, a technology on which cement concrete layer is laid on the existing between roads, apart from encouragement for affordable housing and cement concrete canal lining for bringing back the industry on the high trajectory growth path.

How do the diesel price and declining coal availability concern the industry?
Cement industry is both transport and energy intensive. Diesel is used for outward transportation of cement and clinker; inward movement of input materials like coal; within the plant by dumpers and by captive power plants whereas coal is used in the kiln for manufacture of cement. Therefore, any increase in the diesel price and shortage of coal is bound to have an adverse impact on the overall transportation cost and on the total production cost of cement. It is not out of place to mention here that in the last couple of years, the supply position of coal to the cement industry, as a percentage of its total consumption of fuel, has been declining at a faster pace year after year and this declining trend has touched its nadir now with the supply position dropping to 34 per cent from a comfortable 70 per cent in FY 2004. Cement companies, therefore, have perforce to resort to either open market purchase or imported coal, which even after a steep drop in the prices of imported coal today works out to nearly 50-60 per cent higher.

Despite a drop in the demand for cement, will over production hamper the business?
Surely. If the cement capacity created by the industry, in advance, taking into account future cement demand projections made on the back of governmentÂ’s thrust for the development of infrastructure in the country, did not materialise on time it will certainly have an adverse financial impact on the business of the industry. Cement industry has already been suffering on account of mammoth mismatch between demand and supply of cement. It is estimated that presently there is an excess capacity of 90 million tonne lying idle, created after making huge capital investment.

Do you think cement demand will come from Tier II and Tier III cities in the coming years? Why?
It is difficult to say. However, if we have to bring back our flagging economy into a high trajectory growth path, it is now imperative that conducive environment be created in the country, through government policies and measures which ensure smooth and timely flow of funds, for rapid development of infrastructure facilities in Tier 2 and Tier 3 cities also in addition to encouragement of affordable housing and creation of more job opportunities to arrest the migration of the people into A class and Metro cities.

Which are the issues do you think that need immediate attention?
The major areas which need immediate attention of the government are:

(a) Creation of more cement demand through adoption of cement concrete roads/white-topping; cement concrete canal lining for conservation of precious water up to 50 per cent, presently lost during the transit in the existing canals/channels; promotion of affordable housing through soft loans and enhanced income tax limits through proper implementation of government policies and timely award and funding of the projects.
(b) As a core industry, cement industry be supplied coal as per its requirement and use of alternate fuel encouraged with suitable incentives
(c) Rail transportation, being an ideal mode of transport, be encouraged by way of assuring consistent and regular supply of wagons throughout the year and also by pronouncing clear, transparent and customer-friendly policies with encouragement for bulk movement of cement with attractive incentives wherever private investments are made on procurement of special purpose wagons, etc, and
(d) Overall taxation burden on the cement industry be lowered by 20-25 per cent from its present level of 60 per cent of ex-factory price.

How do you assess the growth potential of the Indian cement industry? How does it differ from global roadmap?
Indian cement industry today is the second largest cement producer in the world, after China. However, when it comes to per capita consumption it is still very low at only 202 kg as against the world average of 485 kg. Therefore, there is a huge potential to enhance our cement consumption if we have to catch up even the world average per capita consumption of cement. This can be achieved by giving major thrust for the development of infrastructure like roads, bridges, ports, dams, canals, housing, apart from providing a level playing field with the global cement exporters by re-imposing the basic import duty on cement which is presently nil.

Which are the technological road maps you suggest which can encourage investment in this sector?
The areas which would encourage direct investment in the cement sector are: incentives for (a) use of alternate fuel in place of coal, in the cement industry as availability of coal has been becoming uncertain and erratic; (b) waste heat recovery; (c) use of renewable energy; (d) development of low carbon binders and (e) national/state highways made of cement concrete.

Could you tell us about some of your future plans for the cement industry?
The expansion plan of the cement industry would depend upon the governmentÂ’s plans and policies for the thrust and development of infrastructure sector in the country by assuring timely award, funding and execution of the projects and schemes and measures which incentivise innovative approach.