PERFORMANCE OF INDIAN CEMENT INDUSTRY: THE COMPETITIVE LANDSCAPE
L. G. Burange Shruti Yamini
WORKING PAPER UDE(CAS)25/(9)/3/2008 APRIL 2008
DEPARTMENT OF ECONOMICS
UNIVERSITY OF MUMBAI
Vidyanagari, Mumbai 400 098
PERFORMANCE OF INDIAN CEMENT INDUSTRY: THE COMPETITIVE LANDSCAPE Author(s): L. G. Burange Shruti Yamini
External Participation: ----Contents: 41 P, 12 T, 8 F, 28 R. No. of Copies: 100
WP. No.: UDE(CAS)25/(9)/3/2008 Date of Issue: April 2008
The cement industry is experiencing a boom on account of the overall growth of the Indian economy primarily because of increased industrial activity, flourishing real estate business, growing construction activity, and expanding investment in the infrastructure sector. The performance of the industry, under different policy regimes, truly establishes that decontrol of the industry and liberalization of the economy has led to remarkable improvement in the indicators such as installed capacity, capacity utilization, per capita consumption and exports. The industry experienced a complete shift in the technology of production, from wet process to dry process. The competitiveness among the firms in Indian cement industry has also been evaluated. For the year 2006-07, out of the sample of seventeen firms (90.21% of the total market share), about 47% have recorded above industry average performance in the overall competitiveness index. The marginal difference between the competitiveness of different firms reveals the tough competition in the industry.
Key Words: Cement, History, Evolution, Decontrol, Performance, Competitiveness, Financial- Non Financial, Regional Dynamics.
JEL Code(s): L61
PERFORMANCE OF INDIAN CEMENT INDUSTRY: THE COMPETITIVE LANDSCAPE L. G. Burange* Shruti Yamini** 1. INTRODUCTION: Cement is an essential component of infrastructure development and most important input of construction industry, particularly in the government’s infrastructure and housing programs, which are necessary for the country’s socioeconomic growth and development. It is also the second most consumed material on the planet (WBCSD 2002). The Indian cement industry is the second largest producer of cement in the world just behind China, but ahead of the United States and Japan. It is consented to be a core sector accounting for approximately 1.3% of GDP and employing over 0.14 million people. Also the industry is a significant contributor to the revenue collected by both the central and state governments through excise and sales taxes. 1.1. Structure of the Industry: The characteristics of the Indian cement industry need to be discussed to understand its structure better. Firstly, it is a combination of mini (more than 300 units) and large capacity cement plants, where majority of the production of cement (94%) in the country is by large plants. The conventional method of cement manufacturing used by large plants (Rotary Kiln) needs high capacity, huge deposits of lime stone in its vicinity, high capital investment and long gestation period. Hence mini cement plants based on Vertical Shaft Kiln technology, suiting the small deposits of limestone are becoming popular. Also they create less environmental pollution. Against the requirement of Rs. 3500 per tonne of capacity of large plants, capital costs for mini-cement plants come to about Rs. 1,400 to Rs. 1,600 per tonne (ICRA 2006). The viability of the location plays a major role in the economics of cement manufacturing (Schumacher and Sathaye 1999). One of the other defining features of the Indian cement industry is that the location of limestone reserves in select States *
Professor of International Economics Research Scholar
4 has resulted in it’s evolving in the form of clusters. The proximity of coal deposits constitutes another important factor in cement manufacturing. Since cement is a high bulk and low value...