After pursuing consolidation for
most of the years during the
first decade of the 21st century, India's cement industry, which is
second only to China in terms of production capacity (231 mmt vs. 1.2 bmt), is on
an expansion spree, going by a spate of capacity additions announced by the
major as well as some regional players. The list is only getting bigger with
the biggies from ACC, Ambuja to AV Birla Group's Grasim-UltraTech combine
to smaller satraps like the Burnpur Cement and Shree Cement entering
the fray to boost capacity in order to meet rising demand. The spurt in
expansion activity has been fueled by the government's continuous thrust on
infrastructure creation in the country under various plans such as
National Highways Development Program (NHDP), Jawaharlal Nehru
National Urban Renewal Mission (JNNURM) and Prime Minister's Gram
Sadak Yojana (PMGSY) by allocating substantial sum for the purpose and a
revival in real estate activity in the country. In this year's Budget, it has
been proposed to raise the allocation of road transport by over 13% from Rs 17,520
cr to Rs 19,894 cr. Besides, increased construction activities in the NCR
region ahead of the Commonwealth Games 2010 too have propped up demand
for cement.
The domestic industry, which was hit hard until the first half of the
previous year as demand slumped in the wake of the unfolding of the worldwide
economic crisis post-October 2008, seems to be on the recovery trail, boosted by
a sharp turnaround in demand aided largely by the government's
various stimulus measures. To cash in on the demand upsurge, the industry
players are aiming at massive capacity additions in the next three-four years.
For instance, Holcim India, which owns around a stake of 46% each in
both ACC and Ambuja Cements, has announced to ramp up capacity from
50 mtpa now to 60 mtpa by pumping in an investment of $1.1 bn. "We are
planning to increase the capacity to 60 mtpa in five years from 50
mtpa now. We will set up 2-3 plants with capacity of 2-3
mtpa each," said Paul Hugentobler, who serves the
Swiss company's executive committee. Holcim is India's top cement
manufacturer, controlling more than a fifth of the total installed capacity of 231
mt, as at the end of 2009. The company's move to enhance capacity through
investing in setting up new plants is, however, surprising given the fact
that only last year it had been scouting for a suitable buyout to further solidify
its position in the promising Indian market. "We are always open to
acquisition," Onne van der Weijde, Holcim's Senior
Vice-President (South Asia) had said in an interview.
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