The per capita consumption of cement in India is less than 200 kg....
"The per capita consumption of cement in India is less than 200 kg, while world average is around 500 kg ... so that is a very optimistic position".
.....And lot more. Stay on to know more as
Anand K Jain, Technical Advisor, UltraTech Cement
about the Indian cement industry.
What role has technology played in environment-friendly packaging for the cement industry?
Today environment - friendly packaging is the norm and technology has in this played a very important role. Cement is generally perceived by many as a polluting industry - mainly air pollution as it involves use of very fine material. Thus, it is necessary that such emissions are controlled during the production and packaging process. With new technologies, the emissions are reduced to the minimum, by installing automatic bag fillers, electrostatic precipitators, etc. Now to a reasonable extent, they are able to to have very clean air within and outside the cement plant. The International Standards for particulate emission have also come down from 150 mg normal per cubic metre to 50 mg per normal cubic metre. The Indian cement industry has geared up and is well equipped to comply with this standard - particularly the new plants have been following these norms The cement industry is poised to play a big role in improving the environment by utilising industrial wastes like fly ash, slag and municipal waste as a fuel in the kiln, even agriculture waste like rice husk and many other industrial wastes.
What about comparisons with China?
India is better than China as far as the quality, fuel and power consumption are concerned. It is only in terms of volume that China is ahead of India. For example, China last year consumed approximately 1,200 mt, whereas India's consumption was around 220 mt. This is basically because they are investing large funds on infrastructure development - in housing and scale of growth is much higher in China. Their GDP is the second largest in the world, and has already crossed $5 trillion. India is only 1⁄4 of their economy. Therefore their cement consumption is more. But as far as the technology parameter and quality is concerned, we are not lagging behind China.
There is huge cost pressure from inputs - power, coal are now expensive. What is the scenario that is most likely to emerge in the near future?
It is true that input costs are going up. In terms of essentials, coal prices are now very high. In the recent past majority of the cement plants have set up their own captive power generation. Cement production is a continuous process and depending on grid power does not prove to be cost-effective as well as a very viable option. The second issue is availability of coal. Coal is one area which is definitely a matter of concern because on an average nearly 180-200 kg of coal is consumed to produce one tonne of clinker. The government is opening up coal blocks for private ownership and some of the companies are considering having their own colliery in India and abroad. Imported coal is also an options. Cement companies have to transport coal from eastern India to different locations. Pet coke can be used as an alternate fuel for the cement industry. Pet coke is a petroleum refinery by-product and it is used in the cement kiln for the burning process in lieu of coal. It also has high calorific value compared to coal. The refinery in Jamnagar in western India produces pet coke, which is being used by some.
There is a trend to set up plant close to the primary source?
Yes, it is a necessity. Clinker has to be produced where the limestone is available - it is known as the parent plant. So you should have your parent plant in an area where limestone is available. And once clinker is available, it can be transported to a thermal power plant where fly ash is available. Then the flyash and clinker can be grinded to drive the final product. From there, cement can be finally supplied to the market. This is an emerging trend.
Coming to the grading of cement, now 53 grades is the standard for Bureau of Indian Standards, should a higher grade be brought in?
In fact the 53 grade cement can produce a very high strength concrete. If you have to go for a higher grade of cement, then you need high grade limestone which is not available in many locations in India. So this is a major constraint. At the moment we do not think that a grade higher than 53 is really needed. Rather what is required is appropriate mix proportions to produce good quality of concrete, to optimise the use of not only the cement, but also of other cementitious material like fly ash, silica fume and slag. If these materials are blended in proper combination and added with a super plasticiser, a high quality and durable concrete can be produced without unnecessarily opting for a very high grade of cement.
Your take on the future of ready mix concrete
Ready mix concrete has a bright future. There is no doubt because it has opened up a new vista in construction. People now have confidence in ready mix concrete even for very high grades like M50, M60. Hence it has opened up a new field for construction to use higher grades concrete. You can have any shape, any height, any span because good quality concrete from the ready mix plant, would be available to the end consumer. Unfortunately, people still compare ready mix concrete with site mix concrete. But the two products are different - the quality assurance and the characteristics of the concrete - what is produced at site and what is produced at the ready mix concrete plant are two different products. So if you pay little more money for ready mix concrete, it is value for money. Slowly people have started realising that if they want quality then they cannot compromise on the quality of concrete because the durability of the structure today mainly depends on the concrete. Ready mix concrete has seen phenomenal growth and when people realise that it is a vital component which enhances durability and the life of the structure, the price position will definitely improve.
Do taxes pose a big challenge?
Yes they do, but still the main constraint is the availability of land within the urban area. If you take land on lease or you buy it, the cost is very high and that adds up to the input cost. Secondly, our towns and cities are very congested and the movement is very slow therefore the throughput of a transit mixer is very less and the transportation cost becomes very high. These are basically the main reasons. Lastly tax is definately a problem. Ready mix concrete has to pay the value added tax (VAT) while if you make at the job site there is no tax. So these factors increase the cost. Actually ready mix concrete is seen as an extension of the cement business and value addition; it is also helpful in many ways because ready mix concrete has been able to provide solutions for mega infra projects. Indirectly, due to availability of ready mix concrete, the cement consumption in the country has gone up.
So what is the business like for ready mix concrete (RMC), when compared with the rest?
Today, ready mix concrete commercial plants produce around 25 million cubic metre of concrete in India. Twenty five million cubic metre consumes around 8-10 mt of cement which is still very low. If we are producing around 200 million tonne of cement then only about 5 per cent goes into commercial ready mix concrete. In many of the developed countries this figure is around 50-55 per cent. So as you can see, in India this industry still has huge potential to grow. Further, the environmental norms have become stricter, size of the projects have increased, and individual houses are less favoured, particularly in metros and tier 2 cities because people are opting for flats. Now, the size of the projects have increased and the conventional methods of making concrete at the site has lost relevance. Even in tier 2 and tier 3 cities like Kolhapur, Ludhiana, Nashik, Vishakhapatnam, Vijayawada, Mysore, etc all these places are responding positively to the ready mix concrete. Ready mix concrete indeed has a
What about the pricing factor, it seems to be on the higher side?
Ready mix concrete is a very fragmented type of industry because the entry barriers are low and anybody can set up a ready mix concrete plant. Basically price positioning is not evident because there are too many players in the unorganised sector and the statutory compliance is almost negligible. These unorganised players offer products to end consumers at discounted prices or at a lower price. I am sure, as the industry grows and construction booms, people will realise that quality is more important than price alone.
With 70 per cent of demand coming from the housing market which has been growing 25-30 per cent - last year it was 15 per cent - how do you see the demand from this segment? Will it be the driving force? What will be the share of infrastructure?
Housing will for sometime be the demand driver for cement. But infrastructure projects are also coming up in a big way, whether it is power or transport, or irrigation, dedicated corridors or urban infrastructure in metros. I think the share of the infrastructure projects will go up and housing may come down. I believe it has already come down to about 55 per cent. There is scope for it to reduce even further.
And what about infrastructure?
The investment in infrastructure is continuously increasing, Infrastructure has a wide spectrum as you know. If you consider an infrastructure project, you can also take in rural areas like the water supply, connectivity, PM Gramin Sadak Yojana and sanitation. Then there are small irrigation and medium size irrigation projects. If we take into account all these investments in infrastructure projects, demand for cement will grow substantially, maybe upto 30-35 per cent.
Could you tell us more about the new technologies in this sector? Do price or lack of awareness hinders use of new technology?
There is lot of emphasis to reduce the input cost and to increase productivity as well as to optimise transportation cost. So the cost reduction should be in terms of power consumption, fuel consumption, the heat recovery and the transportation cost. Being a bulky material, the transportation cost of cement is very high, sometimes even 30 per cent of the total delivered cost. So if you have the main unit that produces clinker and bulk clinker can be transported to the other place by doing so, the cost of transportation would be comparatively low as transportation cost of clinker is lower compared to cement. Then if you add up fly ash where it is available, the cost will still come down. These efforts would reduce the ultimate cost of cement. Transportation is one area, distribution is another. Instead of storing cement in warehouses it should go directly to the end consumer, so that it reduces cost of storage and inventory cost and there is no need to hold it for longer periods and fresh cement can be made available to the consumers. There are other areas also. Major consumption centres of cement are metros like Mumbai, Delhi, Hyderabad, Bengaluru, Chennai and Kolkata. In metros, you can set-up bulk terminals and bring cement from the parent plant as loose cement in specially designed wagons and pack it and supply. The transportation cost can be reduced and availability can also increase. These are some of the areas, where cement industry is already taking the right steps.
Is there adequate availability of machinery or do we have to rely on imports?
Cement plants are largely indigenised. Only some critical components and electronic controlled systems, are still imported. All the fabrication works and many components are produced in India. In total, almost 70-75 per cent is totally indigenous.
How do you see the relationship between demand and supply of cement?
The supply may be higher for a short duration but the demand and supply of cement will shortly match. Thirty million tonne of production capacity is expected this year. Cement industry like any other major commodity business is cyclic in nature When the capacity increases, it overtakes the demand, and when the demand increases, over takes the supply. During that period, more plants are set up.This has always happened and there is nothing new. But still, the per capita consumption of cement in India is less than 200 kg, while the world average is around 500 kg, therefore we are far behind. In case of China, it is over 1,000 kg per head, - that is a very optimistic position in for cement. Fortunately there is no alternate product to replace cement since it is still the cheapest and best material, that serves as a binder.
What are the changes you expect in the coming budget?
The cement industry keeps on presenting their demands for reducing taxes to the government. The taxes should be reduced on cement. The excise duty on steel is 4 per cent but for cement it is still around 10-12 per cent. We expect that cement should be in the same category as steel. At least if the excise duty is brought at par with steel, it will give a lot of relief to the end consumer.