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Background paper – Cement


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Background paper – Cement

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Background paper – Cement

  1. 1. Cement
  2. 2. © Confederation of Indian Industry Contents  Sectoral Overview  The Potential  Existing Enablers  Major Challenges Faced 2
  3. 3. © Confederation of Indian Industry 3 Sectoral Snapshot 2nd Largest producer in the world 6.7% CAGR of Production over FY07-15 Direct Employment to ~150,000 & Indirect Employment to ~500,000 people > USD 3 bn FDI inflow to sector April 2000 – Dec 2015 Source – IBEF, International Journal of Emerging Research in Management &Technology 1.5% Contribution to India’s GDP ~7% Share in global production
  4. 4. © Confederation of Indian Industry 4 Advantage India Infrastructure Growth Robust and high infrastructure growth in 12th Five Year Plan Potential Indian cement market is expected to reach a production capacity of 550 MTPA by 2025 from existing capacity of 390 MTPA Source – CII-AT Kearney Cement Vision 2025; Planning Commission, IBEF Key Drivers of Demand Housing – 67% Infrastructure – 13% Commercial construction – 11% Industrial construction – 9% Policy Initiatives Flagship programs like Smart Cities, Housing for All, AMRUT to give impetus to demand; Adoption of cement for construction of all new road projects
  5. 5. © Confederation of Indian Industry 5 Existing Enablers Policy and Eco-system Budget 2016-17 has proposed  100 per cent deduction for profits to an undertaking in housing project for select accommodation.  Allocation of Rs 7,296 crore towards Urban Rejuvenation Mission (AMRUT and Smart Cities).  Rise in allocation under Pradhan Mantri Gram Sadak Yojana (PMGSY) to Rs 19,000 crore (US$ 2.79 billion) for FY17. Industry Evolution and Capabilities  Has always grown at a higher pace than the economy of India  Return on Investment is high and stable  Low per-capita consumption showcases the potential for this sector.  Huge Export potential considering the Middle East market.  Being a mature industry, availability of skilled human resources is good. Market  Demand for cement is expected to accelerate in the coming years. In order to meet the rising demand, cement companies are expected to scale up production by 56 MT in the next 3 years  Boost to low-cost housing and infrastructure; Smart Cities; India’s road programme and Housing for All, are likely to revive the demand for cement in India  Boost to FDI - Large number of foreign players have entered and have invested heavily in the Indian market Source – Invest India
  6. 6. © Confederation of Indian Industry 6 Major Challenges Faced  High Excise Duty • Cement is one of the highest taxed commodities next only to luxury goods and at present 4th highest revenue generator for the Government of India  Logistics & Railway Constraints • Reduction in the fuel price, and no reduction in rail freight, which is leading to diversion from rail to road • Lack of Cover Sheds and Platforms • Delayed loading time for BCNHL in new sidings  Unavailability of Fly Ash • Erratic supplies despite investing heavily on O&M systems at power plants • Substantial increase in landed cost of fly-ash; Imposition of Excise Duty on Fly Ash • High transportation cost of fly-ash  Compliance of New Emission Standards • The new emission norms introduced require huge CAPEX investments • Timeline for compliance and implementation