Cement industry to spend Rs 90,000 cr on expansion in 6-7 yrs

Buoyed by expectations of huge government spending on infrastructure, India's cement industry will spend Rs 90,000 crore in the next 6-7 years for adding around 317 million tonnes of capacity, a study says.    

"As of August 2009, there were 180 cement projects (under various stages of implementation) with aggregate cement manufacturing capacity of 317 million tpa.     

"If all these projects are implemented, the country will see a total investment of Rs 90,000 crore in the next 6-7 years," a study by ProjectsToday, an online database firm, said.    

By 2015-16, the total annual capacity would be well over 500 million tonnes.     

The study said that over the next three years, the industry would add around 110 million tpa (tonnes per annum) of fresh capacity, taking the total to more than 320 million tpa by 2012.     

The study, however, cautioned that this would lead to excess capacity in the short-term, putting pressure on prices and eroding profitability.     

Of the 180 projects, it said, 149 were entirely new and 71 — with 116 million tpa capacity — were already under various stages of execution.     

The study said that during April-August 2009, 12 cement projects with an aggregate capacity of 10.99 million tpa were commissioned, taking the total capacity to about 224 million tpa at the end of last month.     

"In the remaining seven months, another 33 projects with an aggregate capacity of around 31 million tpa are expected to be commissioned," it added.ProjectsToday said that although new capacity addition of around 110 million tpa by 2012 will lead to excess capacity in the short term, the huge infrastructure capex chalked out by government agencies and demand for rural housing is expected to absorb that in the medium to long term.  

"Due to huge capacity additions expected over next two years, the capacity utilisation ratio is expected to decline to around 80 per cent," the study said.