Economy & Market

A perfect distribution?

Published

11 years ago

September 30, 2015

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The distribution of cement to the end user from the manufacturer is a major cost factor in the landed cost of cement at the user end. ICR takes a look at the major obstacles in cement distribution.

Till 80s cement was available only as a commodity, and the production and distribution of cement was controlled by the Government. One had to apply to a district collector to get cement allotted for a job. It is only during the late 80s that cement was decontrolled and as a result many players entered into cement production, triggering competition into the cement industry.

It has been almost 28 years since cement has been decontrolled. Since then industry has witnessed high level of competition which has forced all the players to create their brand image in the minds of the customer so they can fetch premium price over competitors. But slowly all the companies have started replicating the activities undertaken by any pioneer company and so the companies were forced to control their cost in order to ensure reasonable profits during the lean period, i.e., when the demand is low and prices are under pressure. It is important to note the recent development of selling cement through online shops like Snapdeal, etc.

Mechanics of distribution channels
Companies invariably hire carry and forwarding agents (CFAs) to transport cement to their own or dealers? warehouses, which is either done via road or railways. From CFAs or warehouses, the cement is then transported to dealers/distributors and further to sub dealers who finally sell it to the end user. The physical ownership of goods every time does not get transferred. In the other case, dealers and sub dealers take order from buyers and place it to the companies, distributors coordinate and monitor for the timely dispatch of said orders, transportation of goods and final delivery and in return get their commission. It must be borne in mind that it is high volume and low margin business as stated by both – Nikhil Phadke, Partner, Vaidya & Co, and Senan Shah, Om Swastik Trading.

Distributor network in cement industry is highly dominating, and companies are compelled to hire the services as they rarely have any rapport or contact with the end consumer of their product. Apart from this, distributors have storage facilities, which enable them to control the supply chain. Therefore it becomes an important link in the business chain.

Three major factors affect the cost of cement. These include: logistic (20 to 22 per cent), excise and VAT of which excise and VAT are Government duties and thus cannot be controlled by the manufacturer. So only cost that is in the hands of manufacturer is the logistic cost, and in order to reduce the logistic cost, the companies try to sell their production in the nearby areas.

Moreover as the cement plant has to be installed nearby limestone deposits, plants of various companies are located very near to each other. This creates an intense competition in the nearby areas as all the companies try to sell their product with minimal logistic cost. Largely this is applicable to all the cement plants but as the big companies have huge production capacity at the single plant they have low cost of production and so they can afford to distribute their product at far off places at a slightly higher price. But the small players have limited production capacity so they try to increase their profits by saving on the logistic cost by selling in a limited area, and this technique of saving on logistic cost is shrinking their area of operation. This can be experienced in the states of Telangana and Andhra Pradesh. Thus intense competition is experienced in local areas as big players have to sell some part of their production in local area to get higher realisation and the local companies have to sell in local areas as they cannot afford to sell in far-off places due to increasing logistic cost. Moreover the transportation cost always has an increasing trend, so every company prefers to sell their maximum possible production in the nearby area which increases competition to a great extent.

Today we can say, in all the developed countries, cement is still treated as a commodity whereas in India it is somewhere between commodity and brand. In short, for a retail buyer, companies sell it as a brand whereas for institutional buyers it is sold as a commodity. The dealer is extremely important for both buyer and manufacturer.

Distribution Channel: Cement v/s FMCG
The business is driven on relationship more than that of a brand. The market is extremely price-sensitive and therefore the brand cannot fetch a value beyond a certain level. Typically the institutional buyers squeeze the manufacturers and dealers to a maximum. The systems of payment and collection are better in FMCG sector than that of cement. The channel has to improve on that. Many a times as referred by Phadke, deliveries are effected just on telephone calls without any documentation and dealers have been exposed to a great risk. Probably the younger generation has to learn from it and correct their actions.

According to Rahul Akkara, Associate Vice President – Brand, JSW Cement, "In the cement business, the dealer is accountable for expanding the base across his/her territory and for doing this, he/she needs to have a good sub dealer base, which would help him achieve this. Also the dealer should also have good networking with influencers such as contractors, engineers, masons and builders, who are also equally responsible to increase business for a cement brand in his territory."

Exclusivity so called is meaningless and forced only by the companies even though they understand that exclusive dealers are doing business with other brands, may be in equal volumes only under different names. Secondly as expressed by Phadke, it is not legally enforceable but still cement companies are going on creating exclusive dealers. It needs second thinking.

Cement bags does not carry an expiry date but it does not mean that the old stock can be put to use for any job like casting a slab or column. Here it differs far from that of FMCG products and procedures. Leftover or damaged products are returned to the manufacturers, however it does not apply to cement. Another major difference with that of FMCG products is that the manufacturer scores over that of the distributor and he is dominant where as in cement business chain the dealer is more valued than the manufacturer.

The other issue raised by Phadke is very valid but has no immediate answer. CFAs are becoming cement dealers and competing with traditional channel members. It is important to remember that as CFAs have access to very vital information about the dealers customers and that can be used to compete with them. Even legally it will not be possible for any one to stop such entry but what can be done is they can be allotted different territory for doing business so as to protect the interest of the existing dealers. On the other hand some of the existing dealers have been investing money to have their own transport but it has not been very common.

Surprisingly no one has talked about the loss of cement either by the way of using hooks or because of transloading of shipment. The quantum of loss is significant but since it is a high volume business no one seems to be worried.

Concrete

Cement Makers Reaffirm Commitment to Sustainable Growth

Published

1 week ago

June 5, 2026

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World Environment Day spotlight on innovation and circularity

On World Environment Day, the Indian cement industry reiterated its commitment to supporting India’s climate ambitions through sustainable manufacturing, resource efficiency and the adoption of cleaner technologies.

The Cement Manufacturers’ Association (CMA) said the sector remains aligned with the Government of India’s Net Zero commitments and is accelerating efforts to reduce its environmental footprint while supporting the country’s infrastructure and development agenda.

Parth Jindal, President, CMA and Managing Director, JSW Cement, said the industry is increasingly adopting cleaner technologies, improving energy efficiency and expanding the use of alternative fuels and raw materials. He also highlighted the growing importance of circular economy practices, where industrial by-products and waste streams from one sector are utilised as resources in another.

“The Indian Cement Industry is aligned to the Government’s commitments on carbon mitigation and is accelerating the adoption of cleaner technologies, resource efficiency and circular economy practices while actively exploring the potential of Carbon Capture, Utilisation and Storage (CCUS) as a critical pathway for deep decarbonisation,” said Jindal.

He added that coprocessing industrial waste and by-products helps conserve natural resources, reduce disposal requirements and lower the environmental footprint across multiple sectors.

According to Jindal, sustainability is no longer limited to manufacturing processes but is increasingly influencing investment decisions, innovation strategies and long-term growth plans within the industry.

Echoing similar views, Dr Raghavpat Singhania, Vice President, CMA and Managing Director, JK Cement, said sustainable development extends beyond emissions reduction and must also focus on responsible resource utilisation and waste minimisation.

“Sustainability in the built environment cannot be measured by emissions alone. It is equally about how efficiently we use resources, how effectively we minimise waste and how responsibly we create the infrastructure that will serve future generations,” said Singhania.

He noted that the cement industry is advancing its sustainability agenda through greater resource efficiency, increased circularity, technological innovation and continuous improvements in manufacturing practices. As a key contributor to India’s infrastructure development, the sector has a critical role to play in balancing economic growth with environmental responsibility.

On the occasion of World Environment Day, industry leaders reaffirmed their commitment to supporting India’s climate goals while delivering the materials required for resilient, durable and sustainable infrastructure.

Concrete

Building a Greener Future Together

Published

2 weeks ago

June 4, 2026

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Environmental sustainability requires immediate action, not just long-term commitments and discussions. Recycling, circular economy practices, and technology-driven waste management can help industries reduce environmental impact while supporting sustainable growth.

Author: Jignesh Kundaria, Director and CEO, Fornnax Technology

World Environment Day serves as an important reminder that environmental sustainability can no longer remain confined to discussions, reports, or long-term commitments. The environmental challenges facing the world today demand immediate, measurable, and collective action. Across industries and communities, waste generation continues to outpace our ability to process it responsibly, placing increasing pressure on ecosystems, natural resources, public health, and the well-being of future generations.

One of the most significant shifts required today is a change in how society perceives waste. Rather than being viewed as a material to be discarded, waste must be recognised as a valuable resource that can contribute to both economic growth and environmental protection when managed through the right technologies and systems. This mindset forms the foundation of the circular economy model that countries across the world are increasingly adopting to reduce landfill dependence, recover valuable materials, and create more sustainable industrial ecosystems.

India has made meaningful progress in strengthening awareness around sustainability, recycling, and environmental responsibility over the past decade. Significant efforts are being made to formalise the recycling sector through improved infrastructure, technology adoption, policy implementation, and broader stakeholder participation. These developments are creating a stronger foundation for responsible waste management and resource recovery across the country.

However, achieving long-term environmental impact requires collaboration from all stakeholders. Industries, policymakers, technology providers, and communities must work together with greater accountability to strengthen recycling ecosystems, encourage responsible waste management practices, and create sustainable outcomes through consistent execution rather than temporary interventions.

As someone closely associated with the recycling industry, I firmly believe that technology will play a decisive role in addressing future environmental challenges. Advanced recycling systems have the potential to recover valuable resources, reduce pollution, minimise landfill burdens, and conserve energy, creating a more sustainable future for generations to come. This belief is deeply reflected in Fornnax’s motto, “Committed to Create a Green Future,” which embodies our commitment to building long-term environmental value through innovation and responsible action.

At the same time, technology alone cannot deliver meaningful change. Real progress requires intent, awareness, participation, and a shared sense of responsibility. Sustainable development can only be achieved when innovation is supported by collective action and a genuine commitment to environmental stewardship.

On this World Environment Day, let us move beyond conversations and take meaningful steps towards creating a cleaner, greener, and more sustainable planet. By embracing innovation, strengthening recycling ecosystems, and acting responsibly today, we can create lasting environmental impact and secure a better future for generations to come.

Concrete

Dalmia Bharat Acquires Jaiprakash Associates Cement Assets for ₹2,850 Crore

Published

3 weeks ago

May 25, 2026

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Dalmia Cement executed a Business Transfer Agreement with Jaiprakash Associates and Adani Infra, to acquire 5.2 MnTPA of cement capacity across Madhya Pradesh and Uttar Pradesh.

Dalmia Cement (Bharat) announced on May 22, 2026 that it had signed a Business Transfer Agreement with Jaiprakash Associates Limited and Adani Infra (India) Limited for the acquisition of cement plants located at Rewa in Madhya Pradesh and Churk, Chunar and Sadwa in Uttar Pradesh. The deal was struck at an enterprise value of ₹2,850 crore and is expected to close within two weeks of execution.

The acquired assets from Jaiprakash Associates include 5.2 MnTPA of cement capacity and 3.3 MnTPA of clinker capacity. The package also covers 99 MW of thermal power capacity and railway sidings at Rewa, Chunar, and a common siding at Churk. This infrastructure gives the acquisition immediate operational utility beyond just production tonnage.

The transaction has a long backstory. Dalmia Cement had originally entered into a framework agreement with Jaiprakash Associates in December 2022, covering the sale of these business assets along with a long-term clinker supply arrangement. However, before the deal could be completed, Jaiprakash Associates was admitted to insolvency proceedings under the Insolvency and Bankruptcy Code. The earlier agreements could not be consummated as a result.

In an official statement, Puneet Dalmia, Managing Director & CEO, Dalmia Bharat, said, “I am very excited about addition of these assets in our portfolio. This serves as a great strategic fit for Dalmia. It helps us move forward in our journey to be a pan India player and provide a strong head start to serve the high potential markets in Central region. I am optimistic that the expansion potential of these assets along with close proximity with Dalmia’s captive mines will help us create a capacity hub for the future”.

Following the approval of Adani Group’s resolution plan for Jaiprakash Associates under the IBC framework, Dalmia approached the new management to revive discussions. The fresh Business Transfer Agreement was executed to settle all pending disputes, legal proceedings, and arbitration matters arising from the original framework agreement with Jaiprakash Associates.

Expanding market reach

Dalmia added, “Our familiarity with these assets under the earlier tolling arrangement gives us a deep understanding of the facilities and helps us establish strong connect with channel partners and vendors. We believe that this will help us in faster ramp up of capacities and quicker inroads into the market. As we look forward, I am very confident that we will be able to leverage the strengths of Dalmia to operate these assets in a manner where we can maximise value creation for all our stakeholders.”

With the addition of these plants, Dalmia Bharat’s total installed cement capacity will rise to 54.7 MnTPA upon consummation. The company has further expansion projects underway at Belgaum, Pune, and Kadapa, which are expected to take overall capacity to 66.7 MnTPA by Q2 to Q3 FY28.

The Central India location of the Jaiprakash Associates plants gives Dalmia Bharat faster access to markets in Madhya Pradesh and Uttar Pradesh than a greenfield build would have allowed. The company also cited debottlenecking and brownfield expansion as near-term opportunities at the acquired sites. Dalmia Bharat said the assets were expected to contribute positively to EBITDA and overall returns, given the pricing environment in the region and the company’s cost structure.