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The article gives a detailed insight to the cement industry in India from its growth before independence to modern times, the role of the government and future trends

Cement Industry

The cement industry is one of the vital industries for economic development in a country. The total utilization of cement in a year is used as an indicator of economic growth.

Cement is a necessary constituent of infrastructure development and a key raw material for the construction industry, especially in the government’s infrastructure development plans in the context of the nation’s socioeconomic development.

Cement Industry In India

Prior To Independence
The first endeavor to manufacture cement dates back to 1889 when a Calcutta based company endeavored to manufacture cement from Argillaceous (kankar).

But the first endeavor to manufacture cement in an organized way commenced in Madras. South India Industries Limited began manufacture of Portland cement in 1904.But the effort did not succeed and the company had to halt production.

Finally it was in 1914 that the first licensed cement manufacturing unit was set up by India Cement Company Ltd at Porbandar, Gujarat with an available capacity of 10,000 tons and production of 1000 installed. The First World War gave the impetus to the cement industry still in its initial stages. The following decade saw tremendous progress in terms of manufacturing units, installed capacity and production. This phase is also referred to as the Nascent Stage of Indian Cement Industry.

During the earlier years, production of cement exceeded the demand. Society had a biased opinion against the cement manufactured in India, which further led to reduction in demand. The government intervened by giving protection to the Industry and by encouraging cooperation among the manufacturers.

In 1927, the Concrete Association of India was formed with the twin goals of creating a positive awareness among the public of the utility of cement and to propagate cement consumption.

After Independence
The growth rate of cement was slow around the period after independence due to various factors like low prices, slow growth in additional capacity and rising cost. The government intervened several times to boost the industry, by increasing prices and providing financial incentives. But it had little impact on the industry.

In 1956, the price and distribution control system was set up to ensure fair prices for both the manufacturers and consumers across the country and to reduce regional imbalances and reach self sufficiency.

Period Of Restriction (1969-1982)
The cement industry in India was severely restrained by the government during this period. Government hold over the industry was through both direct and indirect means. Government intervened directly by exercising authority over production, capacity and distribution of cement and it intervened indirectly through price control.

In 1977 the government authorized higher prices for cement manufactured by new units or through capacity increase in existing units. But still the growth rate was below par.

In 1979 the government introduced a three tier price system. Prices were different for cement produced in low, medium and high cost plants.

However the price control did not have the desired effect. Rise in input cost, reduced profit margins meant the manufacturers could not allocate funds for increase in capacity.

Partial Control (1982-1989)
To give impetus to the cement industry, the Government of India introduced a quota system in 1982.A quota of 66.60% was imposed for sales to Government and small real estate developers. For new units and sick units a lower quota at 50% was effected. The remaining 33.40% was allowed to be sold in the open market.

These changes had a desired effect on the industry. Profitability of the manufacturers increased substantially, but the rising input cost was a cause for concern.

After Liberalization
In 1989 the cement industry was given complete freedom, to gear it up to meet the challenges of free market competition due to the impending policy of liberalization. In 1991 the industry was de licensed.

This resulted in an accelerated growth for the industry and availability of state of the art technology for modernization. Most of the major players invested heavily for capacity expansion.

To maximize the opportunity available in the form of global markets, the industry laid greater focus on exports. The role of the government has been extremely crucial in the growth of the industry.

Future Trends
  • The cement industry is expected to grow steadily in 2009-2010 and increase capacity by another 50 million tons in spite of the recession and decrease in demand from the housing sector.
  • The industry experts project the sector to grow by 9 to 10% for the current financial year provided India's GDP grows at 7%.
  • India ranks second in cement production after China.
  • The major Indian cement companies are Associated Cement Company Ltd (ACC), Grasim Industries Ltd, Ambuja Cements Ltd, J.K Cement Ltd and Madras Cement Ltd.
  • The major players have all made investments to increase the production capacity in the past few months, heralding a positive outlook for the industry.
  • The housing sector accounts for 50% of the demand for cement and this trend is expected to continue in the near future.

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