Cement shortage to continue

Prices may remain firm in the coming months.

The cement industry is likely to add around 15 million tonnes of fresh capacity in 2007-08 "� a little over half of the 27 million tonnes it had talked about at the beginning of the financial year.

As a result, the cement capacity in the country will be 182 million tonnes by March 2008, 8.5 per cent short of the target set by the working group on cement industry for the Eleventh Five Year Plan (2007-12).

Analysts felt this could keep cement prices buoyant in the months to come.

The industry and the government have been locked in a confrontation for several months now over high cement prices, prompting the Centre to allow duty-free imports. Some quantities of imported cement have already reached the Indian markets from Pakistan.

Nine months after promising to put up additional capacities of 27 million tonnes, cement companies have added a mere 11.50 million tonnes till date. While the Cement Manufacturers' Association says the industry has so far added 6.35 million tonnes, the figure does not include the capacity expansion of two companies "� ACC and Binani Cement. ACC added 1.4 million tonnes at its two plants and Binani added 4.1 million tonnes recently.

Market players said the industry may add another 3.5 million tonnes in the next three months, taking the total tally to 15 million tonnes.

Market players said that the delay in projects was mainly on account of supply constraints on the plant and machinery front and environment clearances from the government. H M Bangur, president, CMA, and the managing director of Shree Cement, said, "We will not be able to meet the target as project delays are taking place. There will be at least one quarter's delay."

"As most of the projects are greenfield ventures, unlike the earlier expansions which were through modernisations, debottlenecking and brownfield projects, the time being taken for operationalisation is more," said A K Saraogi, chief financial officer, JK Cement, adding: "Additional land requirement and delay in delivery of equipment are adding to the problems."

Market players said that the gestation period for the newer plants had increased by around 6-8 months. Normally it should have been 20-22 months, but now it was reaching 26-28 months, they added.

K C Jain, managing director, Mangalam Cement, said, "My assessment is that by March, 2008, industry will add another 6-7 million tonnes."