The Republic of India has been independent from the UK since 1947. Composed of 29 States and seven Union Territories, India is the seventh-largest country by land mass, spanning 3.29km2. It is the second most-populous country in the world, with 1.24bn inhabitants in 2014.1 India had the world's third-largest economy by GDP (PPP), at US$7.28tn in 2014. It is a major hub for agriculture and tourism and has a rapidly-expanding service industry. With the second-largest cement industry in the world, India is home to a busy and diverse market. Here, Global Cement reviews India's top cement producers and trends from 2014.
Economy
India is one of the BRICS economy countries (Brazil, Russia, India, China and South Africa), which are characterised by fast-growing developing economies. In July 2014, the leaders of the BRICS countries launched the New Development Bank (NDB) as an alternative to the World Bank and the International Monetary Fund (IMF). Headquartered in Shanghai, China, it will start lending to any United Nations (UN) members in 2016. The plan to set up a bank to finance infrastructure projects began in 2012 after the BRICS countries saw investors divert money from emerging economies, hurting their currencies. The NDB was established for US$100bn and has an additional US$100bn in reserves.
India's GDP was US$1.49tn in 2013 (using official US$ exchange rate) and grew at a rate of 3.2% during the year (Figure 1). GDP by purchasing power parity (PPP) was US$7.28tn in 2014, the world's third-largest. GDP growth rates have stuttered in recent years, with a recent peak of 10.3% in 2010.2 GDP/capita grew to US$4000 in 2013, compared to US$3900 in 2012 and US$3800 in 2011.
India's population grew by 1.25% in 2014, contributing to its ever-growing labour force and demand for housing. GDP is contributed to by agriculture (17.4%), industry (25.8%) and services (56.9%).1 Industrial production grew by 0.9% in 2013. The labour force, some 487m in 2013, worked primarily in agriculture (49%), compared to 20% in industry and 31% in services. Unemployment rose from 8.5% in 2012 to 8.8% in 2013, while inflation (GDP deflator index) fell from 7.2% in 2012 to 6.9% in 2013.
India is a major global trade hub with large import volumes and ever-increasing exports. In 2013, some US$313bn of goods were exported, up from US$297bn in 2012, while US$468bn of goods were imported, down from US$489bn in 2012. Imports and exports consisted mainly of petroleum products, crude oil, raw materials, machinery and chemicals.
Cement industry overview
India is one of the world's largest cement producers and consumers, second only to China. According to the United States Geological Survey (USGS), in 2014 India produced 280Mt of cement and had 280Mt/yr of clinker production capacity, unchanged from 2013 (Figure 1). A large number of cement producers, both local and multinational, operate in India. Holcim, Lafarge, HeidelbergCement and Vicat all have a presence in the country, however, India's domestic producers hold the most sway, including UltraTech Cement, Chettinad Cement, JK Cement, Dalmia Group and The India Cements, among others.
According to the Global Cement Directory 2015 and independent research, in 2014 India had 174 integrated cement plants, 155 of which were active, with production capacity in excess of 301Mt/yr (Figure 2). There were also 91 grinding plants with more than 109Mt/yr of production capacity. The capacities of several integrated and grinding plants remain unknown. Of the integrated cement plants, capacity was localised in the west and south of the country. Andhra Pradesh, Rajasthan and Tamil Nadu all had capacities greater than 30Mt/yr. Plans for 13 new integrated plants were announced in 2014, mainly in Andhra Pradesh and Karnataka. One new cement plant was proposed by Meghalaya Cement in West Kameng, Arunachal Pradesh, which would be the state's first integrated plant if built.
As for the other BRICS economy countries, India's cement consumption is growing, primarily due to strong infrastructure and housing developments. In spite of heavy investments, factors including fuel and energy shortages, raw material availability and regional market trends have posed significant
challenges to cement producers in 2014 - 2015.
Company | Plants | Capacity (Mt/yr) | |
1 | Holcim | 15 | 44.97 |
2 | UltraTech Cement | 15 | 32.16 |
3 | Chettinad Cement | 5 | 14.80 |
4 | JK Cement | 6 | 14.60 |
5 | Dalmia Group | 5 | 14.50 |
6 | The India Cements | 8 | 12.97 |
7 | Ramco Cements | 6 | >12.49 |
8 | Century Cement | 4 | 9.70 |
9 | Vicat | 2 | 7.75 |
10 | Shree Cement | 4 | >6.00 |
11 | JSW Cement | 2 | 5.40 |
12 | Zuari Cement | 2 | 5.20 |
13 | Penna Cement | 3 | 5.00 |
14 | Sagar Cements | 3 | 5.00 |
15 | HeidelbergCement | 3 | 4.70 |
Table 1: The top 15 cement producers in India in 2014, as ranked by installed integrated cement production capacity. Sources: The Global Cement Directory 2015 and Global Cement research.
Holcim India: ACC and Ambuja Cements
Holcim is present in India via its two subsidiary companies, ACC Cement and Ambuja Cement. Combined, the companies have 15 cement plants with 44.9Mt/yr of integrated cement production capacity, making Holcim India's largest cement producer. Its plants are well-placed throughout the country, with one or two integrated plants in most states. As such, Holcim is resistant to the regional market forces often experienced in large countries. Holcim also has 15 grinding plants with more than 16.1Mt/yr of production capacity throughout India.
In July 2013, Holcim announced its intention to consolidate its operations in India.3 It received approval from the Cabinet Committee on Economic Affairs (CCEA), the Foreign Investment Promotion Board (FIPB) and public shareholders. Accordingly, Holcim India has been merged with Ambuja and Holcim India's 50% stake in ACC has been transferred to Ambuja, making it a holding company of ACC. Holcim now has a 61.4% stake in Ambuja. While the restructuring and removal of duplicate roles is ongoing, several top-level management changes were seen in 2014, including the appointment of Bernard Terver as the head of Asia.
In August 2014, the Delhi Government's Revenue Department fined Holcim India for evasion of stamp duty and directed it to pay stamp duty of US$36m and a penalty of US$11m within 30 days. Collector of Stamps (HQ) Lalit Mohan said that Holcim had violated the payment of stamp duty with the merger with Ambuja. "The stamp duty on the merger order is payable at the rate of 3% on the total amount of US$1.2bn, which is US$36m," said Mohan. In its submission to the Revenue Department, Holcim stated that there was no transfer of movable and immovable assets from the transferor company (Ambuja) with the transferee company (Holcim India), except shares held by Ambuja in other companies that were transferred to Holcim. Subsequently, Holcim did not see itself as liable for stamp duty.
During 2014 - 2015, ACC commissioned a grinding and blending plant in Udupi, Karnataka. The plant uses fly ash from Udupi Power Corporation's thermal power plant and can blend 30,000t/month of cement. Clinker from ACC's plant in Wadi, Gulbarga is used for cement production at the blending plant. ACC also invested US$499m to modernise its Jamul plant in Chhattisgarh by decommissioning the existing plant and building a 4Mt/yr modern cement plant. It is expected to be finished by the second quarter of 2015. In the future, ACC plans to add a 1.5Mt/yr grinding unit to its plant in Jharkhand.
The construction of Ambuja's three 1.5Mt/yr capacity greenfield cement plants in Rajasthan, Madhya Pradesh and Uttar Pradesh continued in 2014-2015. Its works on 0.8Mt/yr of additional clinker capacity in West Bengal and Rajasthan also continued.
UltraTech Cement (Aditya Birla Group)
UltraTech Cement, part of the Aditya Birla Group, is India's second-largest cement producer by integrated production capacity. It had 15 cement plants and 32.2Mt/yr of capacity in 2014, mostly concentrated in the states of Gujarat, Madhya Pradesh and Rajasthan. This includes 0.56Mt/yr of white cement production capacity from its plant in Jodhur, Rajasthan. UltraTech also had 11 grinding plants with 13.2Mt/yr of production capacity, which are more evenly distributed across the country.
During 2014, UltraTech made several sizeable investments, including the acquisition of Jaiprakash Associates' 4.8Mt/yr cement plant in Gujarat. The plant came with a 57.5MW coal-fired power plant, 90 years of limestone reserves and a captive jetty at Sewagram, Maharashtra, for US$627m. As part of the deal, UltraTech absorbed US$614m of debt from Jaiprakash Associates and issued UltraTech shares worth US$25.2m to Jaiprakash Associates. UltraTech also bought two of Jaiprakash Associates' cement plants with 5.2Mt/yr of combined cement capacity and one 0.56Mt/yr grinding plant, all in Madhya Pradesh. A 180MW power plant that supplies all of the plants was included, for a total of US$740m in loan certificates and US$16m of shares. UltraTech has assumed a net debt and negative working capital of US$128m associated with the businesses. This puts the overall value of the transaction at US$628m.
UltraTech was also reportedly in talks to buy Jaiprakash Associates' cement assets in Solan, Himachal Pradesh, for US$644m. The assets include a 2Mt/yr grinding and blending plant and a 2Mt/yr integrated cement plant. No further updates have been forthcoming regarding this deal.
In 2014, UltraTech Cement Middle East Investments acquired a 51% stake in Omani gypsum mining company Awam Minerals LLC, which has a license to mine gypsum deposits in the south of Oman. The gypsum will be suppled to UltraTech's cement plants in India, among others, addressing its gypsum shortage.
Chettinad Cement
Chettinad Cement, including its majority stake in Anjani Portland Cement, had five integrated cement plants and 14.8Mt/yr of cement production capacity in 2014. Three of its plants are located in Tamil Nadu, making it sensitive to regional market forces and intense local competition. Although it had no active grinding plants, Chettinad Cement has two under construction in Maharashtra and Andhra Pradesh. It is India's third-largest cement producer.
Chettinad Cement acquired additional holdings in Anjani Cement, both on the market and through off-market transactions, during 2014. By the end of the year,
Chettinad Cement had increased its stake to 66.08%. Anjani Cement has a 1.3Mt/yr cement plant in Nalgonda, Telangana and plans to construct a 3Mt/yr
cement plant in Gulbarga, Karnataka.
In 2014, Chettinad Cement announced multiple expansion plans of its own, including a 3Mt/yr greenfield cement plant in Guntur, Andhra Pradesh and two additional 2Mt/yr grinding plants in Solapur, Maharashtra. It also intends to expand its 2.5Mt/yr cement plant in Gulbarga, Karnataka to 5.75Mt/yr
and to install an on-site 130MW captive thermal power plant.
JK Lakshmi Cement
JK Lakshmi Cement had 14.6Mt/yr of active integrated cement production capacity in India in 2014, including 0.4Mt/yr of white cement capacity. It is India's fourth-largest cement producer. Of its six cement plants, four are in the northwestern state of Rajasthan, making it sensitive to regional market forces. It also had three grinding plants with 6.35Mt/yr of production capacity.
In 2014, JK Cement commissioned its 2.7Mt/yr capacity cement plant in Durg, Chhattisgarh. In 2013, the under-construction plant had attracted the wrath of the local inhabitants, who set fire to part of it. They were reportedly angered by the reluctance of JK Cement to give jobs to people affected by the project. During 2014, JK Cement also commenced shipments from its expanded cement plant in Mangrol, Chittorgarh, Rajasthan. It plans to eventually increase the plant's capacity to 3Mt/yr.
Dalmia Group: Dalmia Bharat and OCL India
Dalmia Group operates Dalmia Bharat and OCL India, which between them had five cement plants with 14.5Mt/yr of cement production capacity in 2014. This makes Dalmia Group India's fifth-largest cement producer. Dalmia Group also had three grinding plants via OCL with 4.65Mt/yr of capacity, as its 2Mt/yr grinding plant in Paschim Medinipur, West Bengal, was completed in 2014.
In September 2014, Dalmia Group announced that is was looking at a merger of its listed cement companies Dalmia Bharat and OCL. Dalmia Bharat owns a 48% stake in OCL. As part of the plan, Dalmia Bharat would also merge its unlisted arm, Dalmia Bharat Enterprises, with itself. Dalmia Bharat Enterprises would eventually own a minority stake in the merged listed entity. A previous merger of Dalmia Bharat and OCL India failed in 2008. There have been no updates regarding the merger since.
In March 2014, Dalmia Bharat acquired Jaiprakash Associates' 74% stake in Bokaro Jaypee Cement, which was formed as a 74:26 joint venture project between Jaiprakash Associates and the Steel Authority of India Ltd (SAIL), for the operation of a 2.1Mt/yr capacity grinding plant at Bokaro, Jharkhand. Later in 2014, Dalmia Bharat acquired the final 26% stake from the SAIL for US$150m.
The India Cements
The India Cements is India's sixth-largest cement producer. Including its subsidiary company Trinetra Cement, it had eight integrated cement plants with 12.9Mt/yr of cement production capacity in 2014. Most of the plants are located in southern India, in Andhra Pradesh and Tamil Nadu. The India Cements also had two grinding plants with 2.2Mt/yr of production capacity in Maharashtra and Tamil Nadu.
In May 2014, The India Cements announced plans to merge with its subsidiary, Trinetra Cements, to consolidate its cement operations. The merger would also include Trishul Concrete Products and involve selling land near its plants in Tamil Nadu and Andhra Pradesh. No further announcements have been made.
The India Cements plans to increase the production capacity of its cement plant in Salem, Tamil Nadu, from 0.6Mt/yr to 1.70Mt/yr with an investment of US$13.3m. The plant will have a new line and the existing kiln will be optimised. The project is currently waiting for environmental clearance.
Vicat Group
Vicat Group was the ninth-largest cement producer in India by installed integrated cement capacity in 2014. It had two cement plants with 7.75Mt/yr of production capacity and no standalone grinding plants.
In September 2014, Vicat completed the acquisition of Sagar Cement's 47% stake in their joint venture company, Vicat Sagar Cement. Sagar and Vicat entered into the joint venture in June 2008 to set up a 5.5Mt/yr cement plant in Gulbarga, Karnataka. The first phase of the plant, which was to reach a production capacity of 2.75Mt/yr, was completed in December 2012 and production commenced in January 2013. The plant includes its own captive power plant and access to the rail network.
Shree Cement
Shree Cement, India's 10th-largest cement producer, had four cement plants and >6Mt/yr of installed capacity in 2014. Only the production capacity of its two 3Mt/yr plants in Rajasthan are known and accounted for. Shree Cement also had five grinding plants with 9.5Mt/yr of production capacity. Three of the plants are in Rajasthan.
During 2014, Shree Cement acquired Jaiprakash Associates' 1.5Mt/yr capacity grinding plant in Panipat, Haryana, for US$59.6m. It also won a two-year extension from the government to establish a 3Mt/yr mega-cement plant, limestone mine and 150MW power plant at Kodala, Karnataka.
In the near future, Shree Cement plans to expand its captive limestone-mining project at Raipur, Chhattisgarh from 4.8Mt/yr to 8.6Mt/yr. The project is part of its integrated cement plant. The expansion is currently waiting for environmental clearance and is expected to commence within two years. It also plans to set up a 3Mt/yr grinding plant in Dhenkanal, Odisha for US$74.4m. The location would enable utilisation of the fly ash produced at nearby power plants. A 2Mt/yr grinding plant in Aurangabad, Maharashtra is also on the cards for US$54m. The plant would also have a 12MW biomass-based
captive power station.
JSW Group
JSW Cement, part of JSW Group, was India's number 11 cement producer in 2014 with two cement plants and 5.4Mt/yr of production capacity. It also had two grinding plants with 1.5Mt/yr of capacity.
In 2014, JSW announced plans to switch completely to Portland slag cement (PSC) production, which, according to its CEO Anil Kumar Pillai, is ideal for both infrastructure projects and housing construction. In India, PSC and OPC achieve comparable prices. JSW expects a massive increase in demand for PSC in view of the formation of the new Central Indian government and new state governments, which have increased focus on infrastructure projects. "The Andhra Pradesh government has mandated the use of only PSC in all government constructions,'' said Pillai. He added that PSC is very popular outside India, accounting for more than 90% of total cement production in some countries. However, in India, out of total 360Mt/yr cement produced by Pillai's information, it accounts for just 7%.
In 2014, JSW completed its 4.8Mt/yr cement plant in Kurnool, Andhra Pradesh, which can be extended to have a second line of similar or higher capacity. To meet the expanded slag requirements, JSW will increase the capacity of its steel plant at Vijaynagar, Bellary, Karnataka from 12Mt/yr to 20Mt/yr. It aims to expand its cement production capacity to 30Mt/yr by 2025. To achieve this, it plans to build a 4.3Mt/yr integrated plant in Chittapur, Karnataka and will set up grinding plants closer to its steel plants. It is also considering the production of aluminium, if the government allocates bauxite mines to it.
Zuari Cement (Italcementi)
Zuari Cement, Italcementi's Indian subsidiary, had 5.2Mt/yr of integrated cement production capacity from two plants in 2014. It was India's twelfth-largest cement producer during the year.
Zuari Cement is currently building a 3.2Mt/yr integrated plant in Gulbarga, Karnataka, with a 50MW captive power plant. The cement plant is designed to double its capacity in the future to cater for the growing demand in Karnataka and neighbouring Maharashtra. In April 2014, Zuari broke ground on its 1Mt/yr cement packing terminal in Kochi, Kerala. Completion is expected by the third quarter of 2015.
Sagar Cements
Sagar Cements, India's fourteenth-largest cement producer, had three cement plants with 5Mt/yr of production capacity in 2014. In November 2014, it acquired BMM Cements, a 1Mt/yr cement plant with a 25MW captive power plant and limestone reserves in Anantapur, Andhra Pradesh.
Jaiprakash Associates
Jaiprakash Associates, via its cement arm Jaypee Cement, had five integrated plants with 3.56Mt/yr of integrated cement capacity at the end of 2014. It also had seven grinding plants with 11.7Mt/yr of capacity.
Jaiprakash Associates has been overrun by debt in recent years, which in March 2014 reached US$10.3bn. It has responded by selling large numbers of its facilities across India, including two cement plants in Gujarat (to UltraTech), its 74% stake in Bokaro Jaypee Cement plant, a joint venture with the SAIL (to Dalmia Bharat) and its grinding plant in Haryana (to Shree Cement). In January 2015, Jaiprakash Associates also sold two cement plants, one grinding plant and its power plant, all in Madhya Pradesh (to UltraTech). In 2013 - 2015, Jaiprakash Associates sold US$3.6bn of assets, including US$1.6bn in the cement sector.
Indeed, 2014 was a bad year on many fronts for Jaiprakash Associates. In May 2014, the Himachal Pradesh government cancelled a 2Mt/yr cement plant project that it had achieved clearance for in Chamba, as Jaiprakash Associates had failed to begin works within a set time period. Jaiprakash Associates'
cement plant in Solan, Himachal Pradesh also came under investigation during the year. The Solan plant was allowed to produce 2.05Mt/yr of cement, but was actually producing 3.46Mt/yr. In June 2014, the Himachal Pradesh State Pollution Control Board (HPSPCB) ordered that the overproduction immediately cease. To ensure that the order was followed, HPSPCB asked the electricity provider to limit the plant's power supply.
Up-and-comers
Orient Cement (CK Birla Group)
Orient Cement, a CK Birla Group company, had two integrated cement plants with 4.35Mt/yr of production capacity in 2014. During the year it established a 3Mt/yr greenfield cement plant in Gulbarga, Karnataka and commenced trial operations. Orient Cement plans to acquire another cement plant and to construct new greenfield plants to increase its capacity
to 15Mt/yr by 2020.
Wonder Cement
Wonder Cement had one 3.25Mt/yr cement plant in Chittorgarh, Rajasthan in 2014. It plans to expand the capacity of the plant to 6.75Mt/yr by the fourth quarter of 2015 and has ordered supplies from Germany's Gebr. Pfeiffer, including a raw meal and coal mills. It has also ordered an 8500t/day rotary kiln and a waste heat recovery (WHR) system.
Producer struggles in southern India
Cement demand in southern India was subdued throughout 2014, partly due to overcapacity in the region. Cement production capacity in the south of India is around 110Mt/yr, while demand is only 70Mt/yr. Consequently, cement producers trimmed their capacity utilisation to 55 - 65% and held on to prices to prevent losses.
In February 2014, southern producers like Ramco Cements, Chettinad Cement, The India Cements and Dalmia Bharat started to export cement to Myanmar in response to depressed local market conditions. "We started 10,000 - 12,000t shipments to Myanmar in January 2014. It is not very remunerative, but we have to do something to stay afloat," said Vipin Agarwal, CEO-south of Dalmia Cements. Producers have also been trialling exports to Sri Lanka.
In August 2014, several cement companies in Andhra Pradesh and Telengana closed plants or began to operate on a campaign basis. Among the plants that halted operations temporarily was Panyam Cements' 400,000t/yr capacity plant in Nandyal, Andhra Pradesh. Bheema Coromandel, which has a 1.2Mt/yr plant near Vijayawada, Andhra Pradesh, changed to token production. "There is practically no demand in south India," said N Srinivasan, vice chairman and managing director of The India Cements. "There are expectations of improvements with the new Union Budget proposals for reviving growth, stepping up investments in infrastructure and housing. The bifurcation of Andhra Pradesh has also raised hopes for renewed activity under the new governments in Andhra Pradesh and Telengana."
The LafargeHolcim mega-merger
In April 2014 Lafarge and Holcim announced their intention to merge their global operations. It was said that Holcim's ACC and Ambuja would retain their separate brands. The resulting company, LafargeHolcim, would have operations in around 90 countries and in some regions, market shares exceeding 50%. Global competition authorities have closely examined the deal and most have now approved it, on the condition that certain assets be divested.
Holcim's ACC and Ambuja had 44.9Mt/yr of cement production capacity and >16.1Mt/yr of grinding capacity in 2014. Lafarge India had two cement plants with 2.15Mt/yr production capacity and two grinding plants with 5.6Mt/yr of capacity. Combined, LafargeHolcim would have 47.1Mt/yr of integrated and >18.2Mt/yr of grinding capacity. This is 15.5% of India's integrated capacity and 16.6% of its grinding capacity. In October 2014, Lafarge and Holcim began internal processes to identify Indian assets that might be divested to increase industry competition, but that were not linked to their strategic plans. The process also looked at consolidation of operations and staff.
In November 2014, the CCI said that the LafargeHolcim merger would likely have an adverse effect on competition in the cement industry. The CCI asked the two companies to publish details of the deal on their websites and in four leading daily newspapers. It also sought comments or objections from the public. The latest update came in January 2015, when the CCI's chairman Ashok Chawla said that the final order on the case should be out within a month. The CCI is one of the last global competition authorities that has yet to pass judgement.
Coalgate continued...
Coal is the dominant fuel used for cement and power production in India. However, as in 2013, supplies in 2014 were inconsistent in both quantity and quality and prices continued to rise. One example came in December 2014, when Singareni Collieries Company Limited (SCCL) cut coal supplies to cement plants and instead prioritised thermal power plants in Telangana and Andhra Pradesh. Power plants in the two states use 66% of the coal produced by SCCL, however, they were unable to work to their full capacity in the second half of 2014 due to a coal shortage.
In 2013, state-owned Coal India Limited (CIL) produced 82% of the country's coal and 90% of India's mines were owned by the government.4 According to Coal and Power minister Piyush Goyal, India has adequate coal resources to meet demand, an estimated 302Bnt of reserves. In 2013 - 2014, CIL produced 462Mt of coal, missing a target of 482Mt. The coal ministry anticipates that supplies will fall by as much as 185Mt short of the country's projected 950Mt demand in 2016 - 2017. CIL's poor practices, market monopoly and inefficiencies have been widely-known as the 'Coalgate' scandal since 2012. The shortfall is often made up with imported coal. Although imported coal prices fell sharply in 2014, if prices turn volatile, cement companies face problems. "We cannot depend solely on imported coal prices staying low and neither can the government guarantee high-quality coal on the open market," said H M Bangur, managing director of Shree Cement.
On 24 September 2014, India's Supreme Court cancelled 214 of the 218 coal blocks that had been allocated since 1993. The blocks were for captive use by the cement, steel and power industries, but the allocation process had been accused of lacking transparency. Of the cancelled blocks, 12 belonged to cement companies. At the same time, the Indian government updated the Coal Mines (Special Provisions) Ordinance to allow commercial mining. The update skipped the issue of a regulator, which the government acknowledged would be necessary once commercial mining commenced.
The re-allocation of the cancelled clocks commenced in December 2014, when 36 of the 98 viable coal blocks were allocated. A transparent auction process for 62 of the cancelled blocks intended for end-usage in power, cement and iron production, started in 2015. Rounds one and two included 23 blocks each and took place in February and March 2015. The remaining 16 will be auctioned later. The government asked CIL to stay away from the initial rounds of auctions. CIL agreed, although it requested that the government reallocate a few blocks to it. CIL said that it would likely participate in bidding when coal blocks were auctioned for commercial mining.
In January 2015, a strike by coal workers' unions threatened industrial production throughout India. More than 75% of India's coal output was hit. The industrial action was in protest of the 'disinvestment and restructuring of CIL.' The strike was called off on the second day after the government agreed to re-examine the decision to allow auctions of coal mines to private companies for their own use, as well as allowing commercial mining in the future.
Environmental developments
In February 2013, a new 'Technology Roadmap: Low-carbon technology for the Indian Cement Industry' was released by the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA). The roadmap targets CO2 emission reductions and an increase in the use of alternative fuels.5 Although several Indian producers have already started to use waste tyres, coffee, rice husk and cashew nut shells as alternative fuels, substitution rates are typically low and alternative fuels have not been a priority. However, recent years have seen uptake rates increase and alternative fuels are used in more Indian cement plants than ever before.
The majority of newsworthy environmental investments took place in Gujarat in 2014. According to the Gujarat State Pollution Control Board (GSPCB), the use of alternative fuels and raw materials for cement production increased from 15,693t in 2009 - 2010 to 543,569t in 2013 - 2014. Waste disposal had previously posed a major challenge in Gujarat. The board encouraged cement plants to provide waste collection centres and pre-processing facilities for hazardous waste. "The use of alternative fuels in Indian cement plants has been limited," said the GSPCB. "The thermal substitution rate is <1% in India compared to 10% in Japan and 40% in European nations. The board has set a target of three years to achieve a rate of 10%."
In 2014, Ambuja invested US$16.7m to set up a pre-processing facility for solid/semi-solid waste at its plant in Kodinar, Gujarat. Similarly, Sanghi commenced trial phase operations for using hazardous waste at its plant in Kutch, Gujarat. Sanghi also recently announced plans to invest US$40.5m in 2015 - 2016 for sustainable development, innovation and energy conservation. The plans include a US$24.3m 15MW WHR system at its Kutch plant, which will recover more than 70% of the waste heat generated. For the conservation of coastal soil, Sanghi will undertake a mangrove plantation on the Gujarat coast to protect the ecology and coastal environment and to improve socio-economic development.
Alternative fuel use and other environmental concerns have also been evident in other areas of India. In December 2014, the Tamil Nadu Pollution Control Board despatched 20,000t of effluent sludge generated by textile units in Perundurai to cement plants in Ariyalur for use as an alternative fuel. Cement producers started to accept the sludge after the success of a trial run that indicated no variation in the strength or quality of cement. Following the first order, demand for another 8000t was expressed.
Despite the growing trend towards environmentally-friendly production, emissions are still common throughout India. In February 2014, the Odisha State Pollution Control Board (OSPCB) issued a show cause notice to UltraTech's grinding plant in Arda, Odisha for violating pollution norms. Local residents had complained that dust released by the plant was causing a health hazard. In October 2014, local concerns over the open-filling of fly ash at an NTPC-owned thermal power plant in Kahalgaon, Bihar led to the installation of six fly ash bagging machines with 4800bags/hr or 4000t/day of filling
capacity. The plant provides fly ash to cement producers in the northeast of India.
Cartel case closed
Accusations of cartel practices within the Indian cement industry have been prominent in global media since 2012. In May 2013, 11 Indian producers, Penna Cement, The India Cements, Bharathi Cements, Dalmia Bharat, Bhavya Cements, Zuari Cement, Ultratech Cement, Jaypee Cement, Ramco Cements, KCP Cements and My Home Industries, were fined by a Competition Appellate Tribunal (CAT) order by the CCI for allegedly forming a price-fixing cartel. The charge was brought after complaints by other cement producers and the Cement Manufacturers Association (CMA) in March 2013. The penalty was 10% of their turnover, which the companies appealed, citing it as unjustifiably large. In November 2014, the CCI closed the case due to a lack of evidence.
Amma Cement scheme
In September 2014, the Tamil Nadu government announced the 'Amma Cement Scheme,' under which it planned to buy cement from private manufacturers with the intention of re-selling at a subsidised price.
J Jayalalithaa, Tamil Nadu's chief minister and figurehead of the scheme ('Amma' - meaning 'Mother'), said that she had recently discussed the situation regarding Tamil Nadu's cement production with officials. The state consumes 1.7 - 1.8Mt/month of cement. Some 400,000 - 450,000t is supplied by Andhra Pradesh, where prices had recently risen substantially. As such, Tamil Nadu reduced its purchases from Andhra Pradesh to 150,000 - 300,000t/month. However, Tamil Nadu's cement producers raised their own prices as demand grew.
The Amma Cement Scheme was created in response. The Tamil Nadu government arranged to purchase 200,000t/month of cement from private manufacturers and re-sell it through local distributors at a subsidised price. Beneficiaries are eligible for a maximum of 750 bags and the cement could be bought by submitting a government-approved building plan or A-road plan. Those who want to buy cement for repair and renovation are eligible for 10 - 100 bags. The scheme is also available to those constructing houses under the government's solar-powered green houses scheme. Tamil Nadu Cement Corporation will be the nodal agency and the scheme will be implemented by Tamil Nadu Civil Supplies Corporation and Rural Development Department.
In January 2015, the Tamil Nadu government rolled out the scheme. It was launched in Tiruchirappalli on 5 January 2015 and was expanded in phases and implemented throughout Tamil Nadu by 10 January 2015. 200,000t of cement was secured and sold for US$3/bag in all regions. During the first 15 days, some 100,000 bags containing 5000t of cement were sold. By the end of January 2015, 16,000t of cement had been sold. If the state government reaches its 200,000t/month target, sales will exceed 2Mt/yr, which is more than 20% of the state's consumption.
Gypsum shortage
Indian cement companies are on the lookout for overseas mines to secure supplies of gypsum for cement production. Domestic supplies are limited, which has prompted Indian producers to look to acquire gypsum mines in countries like Thailand, Oman and Iran. The deficit has led to increased dependence on imports and synthetic gypsum to meet demand.
In India, gypsum reserves are located in Gujarat, Rajasthan, Jammu and Kashmir, Himachal Pradesh, Tamil Nadu and Uttar Pradesh. About 90% of India's total gypsum production comes from western and northwestern Rajasthan. At present, usable gypsum reserves in India amount to 140 - 150Mt, of which around 125Mt is available to the cement industry. These numbers are for Rajasthan and Gujarat, as reserves in other states are unusable. This will satisfy the cement industry for seven or eight years.
Binani Cement said that the shortage of domestic gypsum has forced it to consider overseas mine acquisitions, but the high cost of such acquisitions is a deterrent. Some others, like JK Cement, are yet to decide how to tackle the gypsum shortage, while UltraTech has already bought Awam Minerals LLC, which mines gypsum in Oman. The most common solution is imports, although they attract a 2.5% duty.
In February 2015, India's Centre of Mining placed 31 minerals, including gypsum, under the control of state governments by scaling down their status from major to minor as part of a mining policy change. This allows states to decide the mining lease of the minerals. The policy change will let states decide the rate of royalty, contribution to the district mineral foundation, procedure for granting mineral concessions and rules. States still cannot lease out major minerals such as coal without mandatory clearances from central ministries. The decision is expected to drastically shorten the lease approval process and increase production volumes, providing short-term assistance to cement producers.
Outlook
The International Monetary Fund (IMF) has predicted that India's GDP will grow by 6.3% in 2015 and 6.5% in 2016, following 5.8% growth in 2014 (Table 2). This is lower than the average for emerging and developing Asian countries, but much higher than the global average. According to the IMF, India's economic outlook has improved due to lower oil prices and growing industrial investments following policy reforms. The IMF warned of weaker trade demands due to India's economically-unstable neighbours.
Region | 2014 (%) | 2015 (%) | 2016 (%) |
India | 5.8 | 6.3 | 6.5 |
Emerging Asia | 6.5 | 6.4 | 6.2 |
World | 3.3 | 3.5 | 3.7 |
Table 2: The GDP growth rate in 2014 and forecasts for 2015 and 2016 for India, emerging and developing Asia and the world. Source: The IMF World Economic Outlook, January 2015 update.
Reports by analysts agree that India's cement sector should see significant improvements in the coming years. A study by management consultants AT Kearny, in association with the Confederation of Indian Industry, said that per capita cement consumption is expected to grow to 385 - 415kg in 2025 from 185kg in 2014. Cement demand is likely to increase by 2.5 - 2.7 times to 550 - 660Mt/yr in the same period. While infrastructure is expected to lead the growth, the residential segment will continue as the largest consumer, constituting 42 - 45% of total demand. Similarly, Research and Markets analysts have forecast that India's cement market will grow at a compound annual growth rate (CAGR) of nearly 9% in 2014 - 2019, with the housing sector as the main driver. It commented that the industry is currently in a turnaround phase, trying to achieve global standards in production, safety and energy-efficiency. Research and Markets also predicted further industry consolidation, with more small and medium companies entering into joint ventures.
India's cement producers are certainly upbeat on the country's outlook. A wealth of greenfield and expansion projects have been planned by many companies, indicative of anticipation of growing demand. Indeed, JSW Cement expects that a pick-up in demand will drive its capacity utilisation to 75% by April 2015, up from 55 - 60% at the end of 2014.
Despite another challenging year, India's cement industry is headed towards a bright future. Through increased energy-efficiency investments, rising demand due to population growth, improved supply chain management and more transparent government policies, India's cement industry could become a force to be reckoned with on the basis of more than just its size.
References
1. The CIA World Factbook, India.
2. The World Databank.
4. Saunders, A, 'A turbulent time for the Indian cement industry,' Global Cement Magazine, January 2014.
5. Cement Sustainability Initiative (CSI), 'Technology Roadmap: Low-carbon technology for the Indian Cement Industry,' http://www.wbcsdcement.org/index.php/technology/india-roadmap, February 2013.