1) The Indian cement industry is the second largest in the world in terms of production, but per capita consumption is still low at under 200kg compared to the world average of 500kg. 2) There has been consolidation in the industry with big players acquiring smaller regional cement companies. Cement companies operate by focusing on either quality or price. 3) Cement advertising now focuses more on emotional connections with consumers rather than just functional benefits due to information overload. 4) Government infrastructure projects and the housing sector are expected to drive demand growth, increasing per capita cement consumption to 435kg by 2030 and enabling an 82% expansion in production capacity.

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HOW CEMENT INDUSTRYCAN BE THE BOOSTERENGINE FOR
INDIA?
VARUN KESAVAN, RESEARCH SCHOLAR, E – MAIL ID – varunkesavan@yahoo.com
The industry believes that there would be a surge in demand for cement due to
requirements of a strong infrastructure framework that the nation endeavours to
put in place through its government as well as housing projects
India's cement industry is the second largest in the world, in terms of production,
with over 8 per cent (502 million tonnes per annum in 2018) of the global installed
capacity and generating employment for over 1 million people. Unfortunately,
however, this production does not fully convert into consumption as the demand-
supply situation is highly skewed with the latter being significantly higher than the
former. With per capita cement consumption at less than 200 kg when the world
boasts of an average of 500 kg, can the Indian cement industry be the driver of
growth for India?
Industry dynamics
The Indian cement industry consists mostly of regional players, rather than national
ones. The reason for that is cement being a bulk commodity and therefore freight-
intensive, transporting it over long distances proves uneconomical. And hence, this
industry has largely been a regional play.

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Lately, there's been a lot of consolidation - big players have been vigorously
pushing to acquire smaller regional players. This trend is likely to continue, and we
may be witnessing even more acquisitions in the near future.
The industry defines three categories of cement companies. The differentiating
factors between one category and the other are primarily quality and price. Let us
delve a bit deeper into these factors and understand how the industry operates,
playing with either or both of these factors. At the time of construction, the
difference between a good and a not-so-good cement is not visible to the end
consumer. And that is the reason why many low-priced cement companies are
flourishing in the market today. The consumer has little or no idea about how the
cement used in their construction will behave after some years. Hence he does
not put much emphasis on ascertaining the quality and instead, goes after a lower
price.
There are companies which focus on the quality of their cement, to the extent that
they have automated systems for regular quality tests. These systems ensure that
not just a sample of cement is tested but the entire production is tested on a regular
basis. Understandably the cement produced is of superior quality and provides
greater value for the price paid. Building one's own house is a dream fulfilment for
most people and the individual house builders (IHBs) need to realise that the
construction of their house is a one-time investment.

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Saving some amount in cement, which would be quite negligible when calculated
and compared to the total investment being made on the construction, can prove
to be an uninformed decision in the long run.
New shifts in consumer connect
Traditionally, the cement companies have highlighted only functional benefits in
their consumer connect programs or advertisements, with the objective of
educating the end consumer. However, the consumer today is not only well-
equipped to research what they don't know, but they are also flooded with
advertisements and information from multiple sources.
In such an 'information overload' world, the functional benefits are not able to
attract the consumer's attention the way they used to earlier. Rather, in today's
times, it is the emotional connect that has the potential to tap into the consumer's
attention span and subsequently his purchase decision. This has been recognised
by most companies in the industry, which is why cement advertising has more
emotional content and connects with consumers these days.
Scenario in 2020
The demand for cement showed a downward trend during the first half of the FY
2019, owing largely to lower spending by the government, which accounted for
about 40 per cent of the demand.

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Along with that, the real estate sector had also been less supportive, being hit by
several factors simultaneously - labour shortage, a liquidity crunch, weak project
execution, shortage of funds, and less availability of sand and water in many
states. Natural phenomena like cyclone Fani (in case of Bihar, Odisha and WB)
and excessive rainfall also impacted demand.
The silver lining is that the demand growth in the second half is expected to
improve because of a gradual pick up in the government's fund release for
institutional projects. The industry would be witnessing higher revenues and profits
due to lower raw material costs, falling global commodity prices and reduced power
and fuel costs (owing to softening in pet coke and coal prices) as well. The demand
drivers of cement in India are primarily the housing and real estate sector (65%),
public infrastructure (20%) and industrial development (15%). The current demand
is expected to increase owing to expanding investments of these drivers.
Higher government spending on infrastructure and housing will be a key growth
driver for the industry. The government has placed significant emphasis on
infrastructure development with the aim of making 100 smart cities, expanding the
capacity of our railways, upgrading 1,25,000 km of road length over the next five
years and increasing the facilities for storage and handling of goods in order to
reduce transportation costs. The drive to take India's economy to $ 5 trillion by
2025, with initiatives such as 'Housing for All' and 'Smart Cities Mission' will be
heavily reliant on the growth of the cement industry.

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Other government initiatives that are expected to play a pivotal role in driving the
growth of the industry are the construction of cement concrete roads and highways
through the unique Bharatmala Project, construction of rural roads under the
Pradhan Mantri Gram Sadak Yojana, metro rail networks in several cities, bullet
train, etc. which will all propel the cement industry's growth in the long-term. Also
as India's population becomes increasingly urbanised and household sizes
steadily fall, a growth rate of close to 6% per annum is expected from the housing
sector's demand for cement.
The road ahead for cement Industry - 2030
The industry believes that there would be a surge in demand due to the
requirements of a strong infrastructure framework that the nation endeavours to
put in place through its government as well as housing projects. The demand for
the housing segment is expected to grow at 6% per annum' through the PPP model
(Public Private Partnership). As a result, the per capita cement consumption in the
country is expected to rise from 225 kg in 2018 to 435 kg by 2030.
This will enable us to meet the future cement demand of the nation by 2030 at an
additional capacity expansion of 365 MMT; which is an increase of almost 82% of
the current demand. So while it has been a bumpy ride for the cement industry in
the last couple of years however the future looks very optimistic and promising.