Futuristic Trends in Indian Cement Industry
The world-class industry, which is the second largest cement producer in the world, has completed 100 years of its service to the nation. The last three years had been very bad for the cement industry. After expanding at an average rate of 8-10 per cent in the last three decades, the cement growth in 2013-14 had dwindled to 3 per cent, the lowest in the last 20 years, due to slowdown in the economy and deceleration in the construction activities. With cement production at 256 MT against a capacity at 360 MT, the cement industry was saddled with an idle cement capacity of over 100 MT, valuing a colossal dead investment of over Rs 70,000 crore at today´s cost. However, our government´s continuous thrust on and commitment for affordable housing, construction of cement concrete roads, creation of 100 smart cities, world-class infrastructure development, with emphasis on development of freight corridors and port connectivity should give a definite fillip to the creation of more demand for cement in the country.
The results of the government´s initiatives have already started reflecting in the growth of the cement industry to 8.5 per cent in the first eight months of the current fiscal. If this momentum gains further, the cement demand will again pick up a double digit growth. Even with 10 per cent growth, this will accelerate the cement production by over two-and-a-half times, to 665 MT in the next ten years, i.e. by 2024, which would require a cement capacity of around 750 million tonne at 90 per cent utilisation. This will call for an additional investment of about Rs 2.5-3 lakh crore for creating another 390 million tonne of cement capacity.
To meet this level of cement demand, the likely requirement of major inputs in future will be - 156 million tonne coal, including for captive power; 998 million tonne limestone; 13,300 MW of power and 35 million tonne gypsum. The cement plants will further modernise their existing state-of-the-art plants with kiln capacity of 12,000-14,000 tpd or even more.
Issues and challenges
Over the last couple of years, the cement industry´s need has not been duly addressed by the government insofar as meeting its coal requirement is concerned due to diversion of coal to the power sector. From a fulfillment level of 69 per cent of its coal requirement in 2003, the satisfaction level for the cement industry has now touched its nadir at 31 per cent. As we all know, cement industry is as important as the power sector for the growth of the economy. Therefore, disregarding the cement sector for coal supply may adversely impact the massive infrastructure development programme of the government. The government may, therefore, consider treating the cement industry at par with the power sector so far as coal supply to the cement industry is concerned - both for burning coal in the kilns, and for generating captive power.
To supplement its energy needs, the cement industry has been making concerted efforts over the last few years to enhance the usage of alternate fuels like solid municipal wastes, cut tyres, paint sludge, biomass and waste heat recovery (WHR) through co-generation after making huge investments in process technology, but the success rate is not encouraging due to certain technical, regulatory and policy-related constraints being encountered by the industry.
To help the industry in its endeavours, the government should encourage and incentivise greater usage of AFR in the cement manufacturing by making inter-state movement of municipal and other wastes hassle-free and also making their use commercially viable. The imperative is to put in place a set of regulatory measures which make it mandatory for the local bodies to make available cement grade RDF on a consistent and sustained basis by imposing reasonable cost on the generators and creating infrastructure for storage and processing to convert Municipal Solid Wastes (MSW) into RDF.
Increased use of fly ash
Another important development which is going to happen in the cement industry is the enhancement in the Thermal Substitution Rate (TSR) by having increased usage of fly ash from the present 27 per cent in PPC, thereby prolonging the life of our depleting limestone reserves. The present TSR is less than one per cent in India as against world average of over 50 per cent. This will also considerably bring down further the particulate emissions level of the industry apart from cutting down drastically the land required by the power houses for dumping the fly ash generated by them in open land area. It is estimated that the current coal-based thermal power capacity at 1,53,571 MW will require about 61,400 acre of land at 0.4 acre land requirement for per MW capacity. This land requirement would go up further exponentially due to the projected enhancement in the capacity of coal-based thermal power houses in the country.
In the context of our PM´s clarion call for Swachh Bharat and to make the mission a success, it has become all the more imperative to enhance effective usage of industrial, agricultural and solid municipal wastes in addition to fly ash in the manufacturing of cement and also ensure that these waste materials are provided ´Free of Cost´ to its users, on the world-over accepted principle of ´Polluter to Pay´.
The increased cement demand in the country will also see a paradigm shift in the ´movement-pattern´ of cement from the conventional bagged to bulk movement of cement in loose form in special purpose wagons, although bagged cement will continue to dominate the market. Apart from this, movement of cement, clinker, etc. will start taking place through multimodal means, i.e., a combination of Rail/Road/IWT/Coastal modes, as the present government is very keen to develop these transport modes also. Again, this effort will bear fruit only if it is financially viable for the users and simultaneously ensures reasonable returns to the prospective investors as well.
The government under its ambitious ´Make in India´ programme has made a number of attractive schemes/announcements for private investments, both from domestic and international entrepreneurs. However, Indian cement industry has to face the challenges of an uneven playing field due to the government´s policy of allowing duty-free import of cement, despite the fact that India is having over 100 million tonne of surplus cement capacity. The time, therefore, is now ripe to encourage and incentivise the cement and clinker exports from India. Further, import duties on inputs, namely, limestone, gypsum, pet coke, packing bags, etc. required in the manufacturing of cement need to be abolished to realise and truly achieve the Prime Minister´s Vision of ´Make in India´, for in the case of cement, the manufacture is already taking place in India in a big way, and, the removal of import duty on inputs, would give further fillip to the Indian cement industry, in terms of its global competitiveness and viability.
By acknowledging the various inherent advantages of cement concrete roads to the economy, the Minister of Road Transport and Highways, Government of India, has recently taken a policy decision of adopting cement concrete pavements in national highway construction. The decision of the Central Government to go in for cement concrete highways only is a welcome step and will certainly boost the demand for cement. Now the state governments also need to emulate this step by insisting on cement concrete roads for state highways and other roads as well.
On the issue of reduced price for cement concrete roads, I would like to mention that cement industry has often tried to absorb the financial impact of increases that have taken place from time to time in input costs and freight rates, by improving efficiency and productivity through adoption of newer technologies, and, also through innovative initiatives, after making huge investments. In this context, there is a cast-iron case that the taxation burden on the cement industry, which is very high from any angle, at 60 per cent of the ex-factory price, which is more than even on the luxury items, be slashed by at least 25 per cent in the first instance and thereafter, gradually put at par with average tax on cement in the Asia Pacific Region, which is just 11.4 per cent, with the highest levy of 20 per cent being in Sri Lanka.
As per the new provisions of the Mines and Minerals (Development and Regulation) Amendment Ordinance, 2015, limestone mines, will now be available, only through auction process, and there will be ´No Captive Mines´, as has been the case so far. This, in effect, would lead to higher input cost for limestone, the basic raw material required at one-and-a-half times the cement production, and could also deter further investment in the cement industry, as an element of uncertainty will always be looming, once the lease period of 50 years is over. In the light of the peculiarities of the cement industry, therefore, the provisions need to be revisited from the point of view of the cement industry.
The author is Secretary-General, Cement Manufacturers´ Association.