Govt spending on realty sector could pave way to 1.2 pct increase in cement demand

The average cement demand is expected to grow 1.2 times the GDP growth rate in the country over the long term, according to UltraTech Cement. The growth of the industry will be primarily driven by government-led spending on big infrastructure projects and low-cost housing, besides uptick in rural housing.

India is the second largest producer of cement in the world after China, with an installed capacity of 472 mtpa. The domestic industry has sustained cement consumption growth of seven per cent in the last 17 years.

"Industry reached historical GDP multiple in FY'18 post slowdown in the last three-four years...Long-term average cement demand growth is expected to be 1.2 times of GDP growth rate," the Aditya Birla group firm said in its investor presentation. UltraTech, with an installed capacity of 105 mtpa (million tonnes per annum), expects "demand momentum to maintain with improved focus on infrastructure, low-cost housing and uptick in rural housing."

The Reserve Bank of India had last week projected an economic growth rate of 7.4 per cent for 2019-20 as against 7.2 per cent in the current fiscal. The industry would "witness new capacity addition at the rate of 15-17 mtpa", said UltraTech adding that the current capacity additions are backed by old limestone mining leases.

Although India is among the leading producers of cement in the world, its per capita cement consumption is at 210 kg, which is lowest among the developing countries, it said. The world average is 580 kg, while countries such as China has a per capita cement consumption of 1,780 kg, followed by Turkey (830 kg) and Vietnam (660 kg).

The Indian cement industry is witnessing consolidation at regular intervals and top five players hold around 50 per cent of capacity. Presently, the Indian cement industry has 225 plants, owned by 65 players.