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Cement consumption in Telangana and Andhra Pradesh have declined in December as compared with the same time last year, indicating little or no turnaround in the investment scenario in both the states.
The consumption this time around was in the range of 930,000 tonnes to 1 million tonnes a month as compared with 1.5 million tonne in December last year, according to the industry estimates.
"The situation is no different on either sides. Nothing much is happening on the construction front even in big cities like Hyderabad or Visakhapatnam," a senior official of a large south Indian cement company said on condition of anonymity. The demand in Hyderabad fell almost 50 per cent to around 200,000 tonnes a month in recent times, according to him.
In the south only Karnataka and Kerala were doing relatively better, the official said.
Some of the industry representatives are not sure if things would change in the immediate future while others believe fresh public funding in sectors like roads, irrigation and housing that has not so far happened this year, would begin to flow from next year. This, according to them, would trigger the demand for cement consumption in both the states.
The new governments are seen doing little to change the situation even six months after they took over, they said. "Public investments in roads, irrigation, housing and other construction activity always helped the cement sector to improve the capacity utilisation. That is yet to happen," an industry representative said.
A senior official in the Andhra Pradesh government admitted that no new projects had been sanctioned either in roads or in the irrigation sector this year though the government expenditure has already surpassed Rs 70,000 crore. "Government spending has gone up this year. But there is a marked decline in capital expenditure, Just a little bit of work is going on related to the works sanctioned last year," the official told Business Standard.
All of this money is being spent by way of non-plan expenditure with the Chandrababu Naidu government becoming liberal in granting doles like farm loan waiver, pensions and scholarships among other welfare programmes, said analysts.
Even though the Telangana government had earmarked close to 50 per cent of the annual Budget towards the Plan outlay, the situation on the ground is almost similar to that in AP with little or no money in hand for asset creation activities in the current year. The Telangana government is also facing a shrinkage in consumption-based tax revenue starting November, partly on account of reduction in prices of the petroleum products.
The cement industry had early hopes on a large weaker section housing programme announced by Telangana chief minister K Chandrasekhar Rao. However, all the new programmes are still in the drawing board stage for now, according to the officials.
"We do not see any pick-up in demand happening though we were able to maintain the price. Some of us think things would start looking up after festival but nobody knows when that festival would arrive," promoter of a Telangana-based cement company said.
Meanwhile, NCL Industries Limited managing director K Ravi said there was pick-up in retail demand in Godavari districts and Visakhapatnam in coastal Andhra as sand availability had improved after a severe shortage in the past couple of weeks. "We normally sell our product through dealer network catering to the retail demand in these areas. We see some demand returning here,"he said.
