Infrastructure boost under the new government and consequent growth in cement demand is likely to reduce supply-demand mismatch in the cement industry.

 

The Indian cement industry is confronting excess capacity problem since the last many decades, resulting in lower capacity utilisation of cement plants. The country’s present cement-manufacturing capacity is around 375 mt but the demand is only about 300 mt per annum.

 

“However, this gap is likely to shrink as focus on revival of stalled infrastructure projects results in higher demand growth over next few years,” Alok Sanghi, Director, Sanghi Cement Ltd, said here on Monday.

 

Cement companies may benefit from the proposed increase in long-term funding availability for infrastructure projects which is likely to facilitate more investment in these sectors. “Only through infrastructure spending, India can raise its per capita consumption, which is far lower at around 190 kg compared to over 350 kg in Brazil and 1500 kg in China.”

 

Higher spend on public infrastructure is likely to increase cement consumption in this sector, while the share of residential sector is expected to decline. A recent report by CII and AT Kearney, titled ‘Cement Vision 2025: Scaling New Heights”, said while residential and commercial construction will continue to spur cement demand, the industry’s real boost is expected to come from an increase in the pace of infrastructure creation over the next 10 years. An infrastructure investment of between 9-12% of GDP will be required to enable sustained economic growth in India.

 

With the Government focused on nation-wide infrastructure growth and various housing projects in urban and rural areas, the measures to promote investment in ports, roads, airports and other infrastructure projects would support cement demand. “The industry is also likely to get boost from demand for smart cities project,” he said.

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