Skip to main content

India: Pitfalls and potential

World Cement,

In the aftermath of cartel case

Following India’s cement cartel case in June, in which 11 cement companies were fined Rs.6307 crore for price fixing, prices across the country have fallen by an average 2%. It was expected that prices would drop immediately after the Competition Commission of India (CCI)’s findings were announced, but it seems that it has been left to the weather – it is monsoon season – to bring prices down.

The fine was issued by the CCI after an investigation that lasted almost two years, and the penalty has been met with criticism and confusion from the cement industry. In a statement released after the fine was announced, Holcim declared that its member companies, ACC and ACL, ‘contest the allegations…and will pursue all available legal steps to defend their respective position’. The Cement Manufacturers Association was also unhappy with the findings, telling The Economic Times that "The order is a complete miscarriage of justice and doesn't appreciate the role industry associations play in bridging information gaps between sectors and the government". The CMA collects industry data and shares it among its members, a fact which was at the heart of the CCI’s findings. The CMA stopped collecting the data 10 months after the investigation began. The cement case has left other industry associations in India confused as to their role in data collection, and some are considering stopping the practice altogether.

Expansion and under-utilisation

Meanwhile, cement producers are finding numerous obstacles in the path to further expansion during the current Five-Year Plan (2012 – 2017). In the five years to 2012, the industry added 150 million t of new capacity and in the early years of the Plan, profits were high, driving further expansion. The 330 million t capacity achieved by the end of the Plan beat the targeted 300 million t by 10%. Estimates by Working Group of Cement Industry, reported by The Business Standard, show capacity at around 480 million t by the end of the current plan – meaning a further 130 million t would be required. However, difficulties with land acquisition, raw materials and fuel (specifically, coal) supply, sluggish demand and the delays caused by gaining the necessary environmental clearances may put the brakes on expansion plans, warn industry insiders.

"Land acquisition is a big issue,” H M Bangur, Chairman and Managing Director of Shree Cement, told The Business Standard. “None of the state government is providing land to set up units, and getting clearances from different authorities take time.” Capacity under-utilisation is likewise putting manufacturers off investing in expansion projects.

Sales and acquisitions

In other news, Irish giant, CRH, has confirmed that it is in negotiations with Jaypee Cement Corp. to acquire an equity stake in the company’s Gujarat business, which includes a 3.6 million t plant in Kutch and a 2.4 million tpa grinding plant in eastern Gujarat. CRH is already present in the Indian market through a JV with My Home Industries Limited. Meanwhile, Italcementi has denied it is also in talks with Jaiprakash Associates (owners of Jaypee Cement Corp.), which is selling off units in Andhra Pradesh as well as Gujarat to pay off part of its US$8 billion debt. Italcementi does, however, admit the ‘interest of the group in evaluating any opportunities for growth in the country’.

Written by Katherine Markham

Read the article online at:

You might also like


Embed article link: (copy the HTML code below):