A committee under the Chairmanship of Cabinet Secretary is looking at ways to increase the supply from the southern parts of the country to the northern and eastern parts using multi-mode transportation.
This is followed by Finance Minister Nirmala Sitharaman announcement on Saturday when she said in one of series of tweets, related with measures to rein in inflation, “Measures are being taken up to improve the availability of cement and through better logistics to reduce the cost of cement.” Cement together with steel account for nearly 30 per cent of new construction cost.
A top government official listed various reasons for higher price that include not enough supply and reported cartelisation. Also, installed capacity is lying idle in some parts of the country. Now, the issue here is that clinker units are generally located close to limestone quarries or sources as limestone generally cannot be transported long distance. So, the issue here is transportation of cement from areas where there is idle capacity to area where there is supply shortage.
Cement makers’ request
The official informed that recently cement manufacturers from southern region made a presentation before the Central government and said they have idle capacity. They asked for railway rakes and review of telescoping charges. The official said that now effort is to lower the transportation cost.
“One such proposal is use the sea port in southern India to take the cement to a port in eastern part say Haldia. From there, it will be taken to city such as Varanasi using Inland Waterways and then finally using road to final destination,” the official explained.
The All-India average cement price rose by ₹25-30 per 50-kg bag or 8.1 per cent month-on-month (MoM) in April 2022, excruciating up its lifetime high after ₹390 hike per bag over the past 12 months . The price increase by cement companies at the beginning of the month to overcome the cost inflation has largely been sustained. Dealers in select regions/States are suggesting a possibility of another ₹10-20 per 50-kg bag increase in current month
Post a demand dip in Q3FY22 (October–December), Q4 (January-March) saw some improved demand. Demand increased 20 per cent on-year in the first half of FY22, research agency Crisil said, but experienced an unexpected slowdown in the second half due to unseasonal rains, sand issues and labour unavailability, which pulled it down to 7 per cent on-year growth for the full fiscal.
In FY23, cement volume growth is expected to be in the 5-7 per cent range, driven by affordable housing demand from tier-2 and tier-3cities, along with infrastructure. However, high construction costs can limit the demand uptick.