Rs 11.11 trillion for capital expenditure (capex) was one of the key highlights of the interim budget for the fiscal year 2024-25. It has led to the cement industry letting out a sigh of relief and continue with their upward trajectory of enhancing production capacity. The bolstering of infrastructure and housing schemes for the middle class, thanks to the Pradhan Mantri Awas Yojana (PMAY), cement companies are assured of increased demand.
We foresee a significant uptick in construction activities, leading to higher consumption of cement, which bodes well for the industry. Complementing this projected progress is the proposal to develop a dedicated railway corridor for cement transportation. This initiative is anticipated to enhance logistics efficiencies and promote multimodal connectivity, thereby reducing transportation costs and improving supply chain dynamics for cement manufacturers.
Amidst the warm response to the interim Budget, there is a wave of cold apprehension, too. Since 2024 is the election year, the political situation is likely to turn volatile, leading to long-lasting impact on the cement business. As the political drama unfolds, industry experts are holding their breath before announcing any major moves.
Looking at the bigger picture, India continues to be upbeat about consolidating its position as the second largest producer of cement in the world. The Indian cement sector has witnessed an addition of 119 mtpa capacity in the last five years, and is aiming for a capacity addition of 150-160 mtpa over the next five years. With the current production capacity at 595 mtpa, year 2024 is going to be a challenging one as we expect to see additional capacity of 70-75 mtpa in the country’s eastern and central parts, as per an assessment by Crisil.
While the interim Budget proved to be a wholesome one for the cement industry, it remains to be seen, how the cement players will take advantage of this opportunity.