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Creating Value through CSR

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Industrial and social progress can go hand-in-hand, while economic targets are being efficiently met. This can be deduced to be the goal of the current Corporate Social Responsibility (CSR) programmes that are being curated by cement companies. CSR has evolved with a deeper understanding of human and environmental factors that have a direct impact on economic growth.

The world has come a long way from Milton Friedman’s statement, “The purpose of corporate social responsibility is to make profits.” The jury have settled for a clear mandate that corporations have the responsibility to partake in the development of the society around the place where such development is in severe shortage. In India, on 29th August, 2013, The Companies Act 2013 replaced the Companies Act of 1956 and the New Act has introduced far-reaching changes that affect company formation, administration and governance, and incorporates an additional section i.e. Section 135 – clause on Corporate Social Responsibility obligations (‘CSR’) for companies listed in India. The clause covers the essential prerequisites pertaining to the execution, fund allotment and reporting for successful
project implementation.


Most industrial activity in India is in locations far away from the developed cities and towns; there are only a few bright spots, where the township got developed around the industrial unit and the unit only prospered as the development gained ground around the place, whether it be in education, basic health, welfare or skill development. The network effects got better off single units spilling over to a cluster of units. Surprisingly these examples like Jamshedpur, Renukoot and Rourkella in the East or the industrial hubs that later fructified in many regional clusters happened without the enforcement of CSR as a legal requirement.
The early entrepreneurs believed in the role of CSR as a value creating idea, not a mere formality of stipulations and budget exercises, however the need for a uniform code of conduct has made the progress in this area far more structured and corporations can now actually transparently showcase their progress made, which wasn’t the case before.
For an industry such as cement, which starts with a mining activity that is only possible at remote locations, given the limestone deposits, CSR has always been at the forefront of management attention; the Section 135 has put some structure of governance around the subject with specific reporting guidelines.
Of the many areas which outline the focus, the spate of disruptions that Covid-19 had spearheaded threw some additional pointers to the need of additional work. There are three such areas:

  1. Responsibility towards the pool of migrant workers in times of disruption
    The disruptions around the pandemic started with displacement of people in both directions, from the place of work to the place of home and vice versa. Lack of information, communication, absence of logistics, absence of mobile health services, all of this compounded into a cascade of events leading to major dislocations that impacted lives and livelihood of people. When such dislocations happen, the corporates suffer in the form of production losses, delivery delays and rising cost of sales. Concerted preventive work needs to be done in a planned manner as in remote locations that depend on migrant workers, all of these cannot be left for government support only as has been the case in the last pandemic.
  2. Facilitating skill development centres at the industrial cluster
    Skill development is one of the central tenets of CSR activities, which needs to be also seen in the light of those specific skills that are in short supply in the cluster where the unit operates. Investments in this area have to go up many times to ensure that rigid dependence on migrant labour can be minimised. Skill development is more than just the numbers and hours, but actually ensuring the quality of skills to match what skilled migrant labour provide, whether in the area of masonry, carpentry, fitter or technician to the specialised skills around kiln maintenance.
  3. Employability improvement program at the cluster
    This is the final step to ensure that skills developed in the cluster are retained through employment in the cluster, which is a logical progression of the theme. Schemes that focus on a comprehensive skill development program that is targeted to certain specialised jobs in the industrial activities of the cluster, will make the circle complete.
    Cement industrial complexes in remote settings suffer from local skills and while the migrant labour fills up this void, it remains the responsibility of the unit to create a sustainable supply of labour that will create continuity of operations. This is more than just CSR, it is a core business challenge that we are talking about here. Take kiln maintenance, refractory lining, replacement, overhauling of key equipment and none of this can be done with only the local skills available at the cluster.
    A crisis like the pandemic has taught us that those skills, which make our units run efficiently, more often than not, come from the distant quarters in our land. If we take care of these migrant labour in times of crisis, we could do better in staving off major disruptions. Having a more long-term view on this will lead us to make changes in the way we look at skill development in the clusters of industrial activities.
    This is where CSR moves to a value creating role, both for industrial progress as well as for the society where such activities are entrenched.

– Procyon Mukherjee

Concrete

Lower sales realization impacts margins for cement makers in Q2 FY25

The industry encountered several challenges, including an extended monsoon season.

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Major cement manufacturers reported a decline in margins for the September quarter, primarily due to lower prices, which led to decreased sales realization.

With the exception of three leading cement producers—UltraTech Cement, Ambuja Cement, and Dalmia Bharat—smaller companies, including Nuvoco Vistas Corp, JK Cement, Birla Corporation, and Heidelberg Cement, experienced a drop in both topline and sales volume during the second quarter of the current fiscal year.

The industry encountered several challenges, including an extended monsoon season, flooding, and a slow recovery in government demand, all contributing to weak overall demand.

Despite these challenges, power, fuel, and other costs largely remained stable across the industry. The all-India average cement price was approximately Rs 348 per 50 kg bag in June 2024, which represented an 11 per cent year-on-year decrease to Rs 330 per bag in September, although it saw a month-on-month increase of 2 per cent.

In the first half of FY25, cement prices declined by 10 per cent year-on-year, settling at Rs 330 per bag. This decline was notable compared to the previous year’s average prices of Rs 365 per bag and Rs 375 per bag in FY23, as reported by Icra.

Leading cement manufacturer UltraTech reported a capacity utilization rate of 68 per cent, with a 3 per cent growth in volume. However, its sales realization for grey cement declined by 8.4 per cent year-on-year and 2.9 per cent quarter-on-quarter during the July-September period.

In response to a query regarding cement prices during the earnings call, UltraTech’s CFO Atul Daga indicated that there had been an improvement in prices from August to September and noted that prices remained steady from September to October. He mentioned that the prices had risen from Rs 347 in August to approximately Rs 354 currently.

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Concrete

Steel companies face Rs 89,000 crore inventory crisis

Steel firms grapple with Rs 89,000 crore stockpile amid import surge.

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Steel companies in India are facing a significant challenge as they contend with an inventory crisis valued at approximately Rs 89,000 crore. This situation has arisen due to a notable increase in steel imports, which has put pressure on domestic producers struggling to maintain sales in a competitive market.

The surge in imports has been fueled by various factors, including fluctuations in global steel prices and increased production capacities in exporting countries. As a result, domestic steel manufacturers have found it difficult to compete, leading to rising stock levels of unsold products. This inventory buildup has forced several companies to reassess their production strategies and pricing models.

The financial impact of this inventory crisis is profound, affecting cash flows and profitability for many steel firms. With domestic demand remaining volatile, the pressure to reduce prices has increased, further complicating the situation for manufacturers who are already grappling with elevated production costs.

Industry experts are urging policymakers to consider measures that can support local steel producers, such as imposing tariffs on imports or enhancing trade regulations. This would help to protect the domestic market and ensure that Indian steel companies can compete more effectively.

As the steel sector navigates these challenges, stakeholders are closely monitoring the situation, hoping for a turnaround that can stabilize the market and restore confidence among investors. The current dynamics emphasize the need for a robust strategy to bolster domestic production and mitigate the risks associated with excessive imports.

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Concrete

JSW and POSCO collaborate for steel plant

JSW Group and POSCO ink MoU for steel project.

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JSW Group has signed a Memorandum of Understanding (MoU) with South Korea’s POSCO Group to develop an integrated steel plant in India. This collaboration aims to enhance India’s steel production capacity and contribute to the country’s growing manufacturing sector.

The agreement was formalized during a recent meeting between executives from both companies, highlighting their commitment to sustainable development and technological innovation in the steel industry. The planned facility will incorporate advanced manufacturing processes and adhere to environmentally friendly practices, aligning with global standards for sustainability.

JSW Group, a leader in the Indian steel industry, has expressed confidence that the joint venture with POSCO will bolster its position in the market and accelerate growth. The project is expected to attract significant investments, generating thousands of jobs in the region and contributing to local economies.

As India aims to boost its steel output to meet domestic demand and support infrastructure projects, this partnership signifies a crucial step toward achieving those goals. Both companies are committed to leveraging their expertise to develop a state-of-the-art facility that will produce high-quality steel products while minimizing environmental impact.

This initiative also reflects the increasing collaboration between Indian and international firms to enhance industrial capabilities and foster economic growth. The MoU sets the stage for a promising future in the Indian steel sector, emphasizing innovation and sustainability as key drivers of success.

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