No concrete plans
The cement industry is India's ultimate sunshine industry. Up until the 1980s, it was not growing phenomenally. Now it is. After cement was decontrolled in 1989, the industry took off -- its growth rate far outstripping that of the country's gross domestic product. In terms of production capacity, it has grown almost two-and-a-half times -- from 61 million tonnes in 1989-90 to 157.5 in 2003-2004. And going by projections put out by the Planning Commission's Working Group on Cement, by 2006-07, annual capacity will exceed 200 million tonnes. With a boom in infrastructure, housing and industry, the Indian cement industry can realistically look forward to being the fastest growing industry in the world.
Big companies dominate cement. Grasim Industries Limited (gil), owned by the Aditya Birla Group, is the largest cement manufacturer in the country and the eighth largest in the world. Associated Cement Companies Limited (acc) is second: it was controlled by the Tatas before Ambuja Cements India Ltd, a joint venture between the Ambuja Group and the Swiss multinational Holcim, bought into it. Gujarat Ambuja Cement Limited (gacl), held by the Ambuja Group, south India-based India Cement and BK Birla's Century Textiles and Industries Ltd follow in that order. The top five collectively control 52 per cent of the market.
The big companies are, in fact, growing bigger and more profitable. The gross profit margin of the top five in the last five years was as good as those of the top five global companies -- more than 20 per cent of turnover. gacl is one of the most profitable cement companies in the world, with a great profit-turnover ratio. Several factors have contributed to this scenario. It gets cheap raw material in the first place and cuts costs by using waste materials -- like flyash. With raw material costs pegged at just 7.3 per cent of turnover, Indian cement is on velvet.
Most cement companies modernised after 1989 -- installing state-of-the-art automation. The result is that their major cost, energy, which accounts for 25 per cent of turnover, compares favourably with the best in the world. Automation has reduced labour costs by 3.4 per cent of turnover.
The industry is so cost-efficient that few multinationals can compete without availing the advantages entailed by a base in the country. So global players have been buying into Indian companies. France-based Lafarge Cements, the Holcim group and Italcementi from Italy have entered markets by investing in or buying out Indian companies. Holcim invested in Kalyanpur Cements in 1990; Lafarge acquired Tata Steel's plants in 1999; and Italcementi set up shop with the K K Birla group, acquiring a 50 per cent stake in Zuari Cement in 2000.
Sunshine or downpour, there is something rotten in the state of India's cement industry. When the Centre of Science and Environment's (cse's) green rating project (grp) did a job on 41 plants owned by 23 companies, with a 79 per cent of total installed capacity and 83 per cent production, it found the downside of this massive boom: an immensely destructive ecological cost spiralling out of control. What follows is grp's comprehensive audit.
Click here to see the Report Card>>