The Hindu Business Line : Cement likely to remain in short supply in AP

Demand drive
Assembly elections to boost Govt construction activity.
State orders at 48 lakh tonnes this fiscal.
Overall consumption may grow at over 12.5% in 2007.
Builders pin hopes on imported cement.

Hyderabad April 25 The cement supply scenario in Andhra Pradesh may continue to look grim as the massive increase in demand from the State Government for official housing programmes is likely to impact the general market, according to industry experts.

The State Government orders alone have gone up to 48 lakh tonnes for the current fiscal, compared to over 24 lakh tonnes during 2006-07. In addition there is backlog as well. "The cement delivered on Government orders up to March 31, 2007 was 18 lakh tonnes. Another four lakh tonnes are yet to be delivered," Mr Ramesh Chandro, President, All India Mini Cement Manufacturers Association told Business Line here on Wednesday.

As per the Government records, the cement production capacity in the State was 26.3 million tonnes in 2006-07. "But in reality the production was only 22 million tonnes. At modest estimates, the cement consumption may grow at over 12.5 per cent this year," Mr Ramesh said.

Demand estimates

The industry is expecting that the demand growth would far exceed the predictions this year. "As the State Assembly elections are due over the next two years, there would be escalation in Government construction activity. The housing segment in the general market may pick up as loans below Rs 20 lakh may get cheaper in the aftermath of RBI's credit policy. All this add to the already buoyant market," he added.

In an apparent bid to woo the cement suppliers, the State Government hiked the cement price by Rs 10 for public constructions like the Indiramma scheme on Tuesday. It has also requested the suppliers to ensure four-lakh tonnes of cement per month, which may prove to be a tough demand. "The issue is not price but capacity," he pointed out.

Eye on imports

Meanwhile, the builders in the State are building their hopes on imported cement. "There is talk that cement imports from Pakistan may be cheaper if they are brought to India by road. We will have to see what happens over the next one month," Mr S.N. Reddy, Chairman, Builders Association of India (AP) said.

"It appears that the construction activity in the State is heading towards a standstill in the days to come. It should be examined whether cement imports from countries like South Korea are feasible. The scarcity of supplies, coupled with a steep increase in costs, are making construction unviable," he said.

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