Sumit Banerjee, Vice Chairman, Reliance Cement.

We are committed to sustainable growth. All our cement plants, either in the project phase or in the project development phase, will be very energy- efficient. These plants are designed to use AFR and are equipped with the WHR system for power generation. A roadmap with medium and long -term action plans to adopt various carbon emission reduction levels has been developed, says Sumit Banerjee, Vice Chairman, Reliance Cement. Excerpts from the interview.

How has the cement industry performed in the last four quarters?

Cement consumption has grown by about five per cent in FY2012-13 as compared to 7.1 per cent in FY2011-12. Demand growth in most of the regions is either declining or stagnating, with very few pockets of positive growth. Demand in the June quarter also remained weak due to early and heavy monsoons across India and poor infrastructure related growth.

Price reduction (~5 per cent reduction y-o-y in Q1FY14) and cost increases continues to hurt sector margins, as is clearly visible from the June quarter results of some of the cement majors. Freight costs are higher due to the increase in diesel price while the linkage coal price increase has already set off the benefit of lower imported coal.

Our per capita cement use is very low, 156 kgs, as compared to the global average of 396 kgs. What needs to be done to raise this?

Given the intense shortage of housing in the country, this segment will remain the primary demand driver for the cement industry. While urban housing will continue to be the cement industry’s mainstay, the rural/individual housing is expected to spring a surprise. Rural areas largely depend on temporary (kutcha) houses and there is an acute shortage of sustainable (pucca) housing in these areas.

The infrastructure sector which accounts for 20-25 per cent of the total consumption, also plays a major role in the demand for cement. With the country’s pressing need to strengthen its infrastructure further, increased construction activity might see a huge rise in the consumption of cement. However, give the current dismal sentiment in the infrastructure sector, this is unlikely to happen, in reality.

Recent ratings by CARE research indicate that we have hit over -capacity. Is it time to slow down?

Cement is a cyclical industry and continues to witness peaks and troughs cycles. What we are witnessing today is hopefully the bottom of the cycle and the industry should bounce back in the next couple of years, with demand picking up and a decline in new capacity creation.

How is the industry coping with rising costs of energy and transport?

In the current scenario of dampened demand, the industry is unable to pass on the cost increase and this is directly affecting the profitability margins of cement companies. Some cement majors are focusing on cost management like increased usage of alternate fuels and renewable energy.

The rate of tax on cement is very high in India, compared to other countries. How are we dealing with competition from foreign players?

Cement import in this country is negligible when you factor in the overall consumption. With the continuous depreciation of the rupee, whatever import is happening today will also be further unviable and hence there is no threat of foreign competition. Also, lack of infrastructure at the ports for handling of bulk cement are creating additional barriers for the import of cement.