The fourth quarter of the last financial year was a washout for the cement sector as prices dipped across the country. From a drop of Rs.5 per bag in central India to a drastic cut of Rs.10 per bag in Gujarat, the flat trend of the last few months can be attributed to unseasonal rains and low labour availability affecting construction activities. Volume push, fall in demand and increased discount offerings are other factors that have affected attempts of price hikes. But fast recovery is expected in the June quarter as demand picks up amid seasonal recovery.

Another reason for the cement sector to recover on the price front is the upcoming elections. With elections scheduled in 2024, the government is accelerating all of its housing and infrastructure initiatives, thereby spurring the demand for cement. Cement companies are definitely bullish about growth and the Indian cement industry is likely to witness a fresh capacity increase of 145 MT-155 MT amounting to a capex of Rs.1.2 lakh crore by FY27. A report by CRISIL confirms that demand for cement will remain buoyed at a CAGR of 6-7 per cent over the forecast period. The addition of 145 MT-155 MT to the already existing capacity of 570 MT will further consolidate India’s position as the second largest cement producer in the world.

Cement is an important component of revenue for the state governments and this point has been underscored by the recent impasse in Himachal Pradesh where the Ambuja and ACC plants had been shut down for over two months over the disagreement over freight charged by the 6,500 truckers. The state government was losing Rs.60 cr to Rs.80 cr per day in electricity, VAT and GST. A GST cut from 28 per cent to 18 per cent would reduce GST revenues by Rs.13,000 cr annually. However, if this reduction in price is passed on to the consumers, a higher demand could reduce the reduction in revenue. Finally, the impasse was resolved with the intervention of Himachal Pradesh Chief Minister Sukhvinder Singh Sukhu. Himachal Pradesh truckers, agreed to a lower freight rate after the company assured them of additional volumes from neighbouring states.

Another trend that is emerging with regards to adding fresh capacity is the logistics-oriented approach. Many cement companies are preferring to install their new grinding units near the distribution centres for freight cost rationalisation. This will also boost the attempts to decarbonise cement. Further, initiatives such as the launch of LNG trucks by Dalmia Cement (Bharat) for transportation of raw materials and bagged cement is helping build a green supply chain for cement. Decarbonisation is taking place in every step of the supply chain, and India is definitely a trailblazer in green initiatives in the cement sector.