The Hindu Business Line : As global majors strengthen presence — Indian cement industry logs highest growth in output

GLOBAL cement majors such as Holcim forking out huge premiums to strengthen their presence in the Indian market should come as no surprise with the domestic cement industry registering the fastest growth in production globally over the last 10 years, beating China to second place.

Cement production in the country recorded a compounded annual growth rate (CAGR) of 8.2 per cent between 1994-2003, as compared with a 7.2 per cent growth clocked by the Chinese cement industry and the world average of 3.5 per cent growth, according to data sourced from the US Geological Survey by the IBEF.

The increase in cement production is only expected to pick up as the country continues growing at over 6-7 per cent annually, according to analysts.

Swiss-cement major Holcim paid the equivalent of more than $200 a tonne for picking up a 14.8 per cent stake in Gujarat Ambuja on January 30, which is among the highest valuations in cement industry deals during the last five years or so, they said.

Besides India and China, the other countries that have seen significant growth in production include Brazil, Spain and the US. On the other hand, Germany and Japan are among countries that have shown a downturn in production during the 10-year period, as per the data.

According to analysts, the predominant reason for the fast growth in the Indian cement industry is on account of a combination of the rapid economic growth and the fact that the Government shackles on the sector was removed early.

The sector was decontrolled from price and distribution restrictions in 1989 and delicensed in July 1991.

According to Crisil Advisory Services, the Indian cement industry is projected to grow at a CAGR of around 7 per cent over the next five years.

For the development of the cement industry, the Government had constituted a `Working Group' in the Planning Commission during the formulation of Tenth Five Year Plan, which forecast a growth rate of 10 per cent for the industry during the plan period and has projected creation of additional capacity of 40-62 million tonnes mainly through expansion of existing plants.

The thrust areas for improving demand for cement include the Government's efforts to further push to housing development programmes, promotion of concrete highways and roads and the use of ready-mix concrete in large infrastructure projects.