CementVision2025ScalingNewHeights

1 Cement Vision 2025: Scaling New Heights
Cement Vision 2025:

Scaling New Heights
The cement industry is a vital part of Indias
economy. A changing landscape will require
government support and strategic industry
decisions to take it to the next level.
Contents
Preface 1
Advisory Committee and Working Committee 2
Executive Summary 3
Historic Journey of the Industry 6
Emergence of the worlds second-largest cement industry 6
Indias unique cement demand profile: customer, channel, and product mix 10
Improvement in operational eficiency and technology 14
Supply-side challenges and impact on business model and economics 17
Outlook for the Cement Industry 22
An evolving and growing future 22
Creating the capacity for future growth amid challenges 31
A greener and more eficient cement industry 35
Vision 2025 39
A promising future for Indias cement industry 39
Imperatives for Vision 2025 40
Appendix 48
GDP at purchasing power parity for relevant countries 48
Glossary of abbreviations 49
Preface
The cement industry plays a significant role in the
economic development of any nation, providing a vital
raw material for the basic building blocks of a nations
infrastructure and housing development. Indias cement
industry has historically grown faster than the overall
economyin fact, its remarkable progress has made India
the worlds second-largest cement producerand it has
evolved to become one of the most efective industries in
the world in terms of thermal and process eficiencies.
While achieving manufacturing and technological
advancement, the industry has also been a strong
contributor to employment, fiscal revenue, and
community development.
Given the crucial role of this industry in Indias growth,
it is important to analyze what the future holds and
determine where the industry wants to be in the next
10 to 12 years. How will the market landscape change,
and how will consumer preferences evolve? What are
the main challenges the industry will likely face? What
imperatives will allow the industry and the government
to overcome these challenges and ensure that the
nations infrastructure growth is sustained?
This report examines these questions, with a view
toward exploring and outlining a vision and key
objectives for the industrys continued success.
We discuss the industrys evolution and contributions,
present an outlook, and examine the probable
challenges ahead. The report culminates with a vision
for 2025 and our recommendations for key stakeholders.
Advisory Committee and Working Committee
We formed an advisory committee and working committee, comprising industry veterans,
to develop this report. The advisory committee played an active role in guiding the team
and contributing strategic inputs to the report and a major role in developing the vision and
identifying the key imperatives for the future. The working committee provided content
and helped validate a number of the key hypotheses and future projections.
Advisory Committee
Mr. Sumit Banerjee, Chairman
CII Cement Industry Division
Mr. Kuldip Kaura, CEO & MD
ACC
Mr. Onne van der Weijde, Managing Director
Ambuja Cement
Mr. Vinod Juneja, Managing Director
Binani Cement
Mr. Ashish Guha, CEO & MD
Heidelberg Cement
Mr. Madhav Singhania, Special Executive
JK Cement
Mr. Ujjwal Batria, Chief Executive Oficer
Lafarge India
Mr. M. H. Dalmia, President & CEO
OCL India
Mr. O. P. Puranmalka, Whole Time Director
Ultratech Cement
Mr. Krishna Srivastava, Whole Time Director
Zuari Cement
Working Committee
Mr. Jayanta Dattagupta, Chief Commercial Oficer
ACC
Mr. Sanjeev Sood, Head PMO (Business Excellence)
Ambuja Cement
Mr. Krishan Goenka, President (Logistics)
Binani Cement
Mr. Jamshed Cooper, Director, Sales & Marketing
Heidelberg Cement
Mr. R. C. Shukla, President, Marketing
JK Cement
Mr. Rakesh Ram, AVP BDS
Lafarge India
Mr. S. C. Ahluwalia, Executive Director R&D
OCL India Limited
Mr. Rajesh Sarda, Vice President
Reliance Cement
Mr. Anand Mohta, Head, Business Analysis &
Development
Ultratech Cement
Mr. Jacob Mathew, AGM, Communication
Zuari Cement
Executive Summary
As we look to the future of Indias dynamic cement industry, we expect robust growth to
continue. The nations cement demand is expected to reach 550 to 600 million tonnes per
annum (MTPA) by 2025, mainly as a result of infrastructure and housing needs as India continues
to urbanize. Meeting demand will require considerable capacity addition and a sharp rise in
available resources, which could present challenges. Aspiring to become one of the worlds
most highly respected, energy-eficient, and environmentally friendly industries will aid Indias
cement business as it advances. Government support will be crucial as well.
Evolution of the industry to its current state
Rapid acceleration in capacity and production, while meeting global standards for manufac-
turing technology, energy eficiency, and safety, has made the cement industry integral to
Indias growth in the past decade. The industry has consistently contributed more than 5
percent of Indias fiscal revenue and is the leading environmentally sound sink for industrial
wastes. The sector also employs more than one million people directly and indirectly.
As a country, however, India has one of the lowest per capita consumptions in the world, even
when compared to other economies at similar prosperity levels (GDP per capita). Unlike
developed markets and large developing markets such as China, India has some distance to
go to create suficient infrastructure, overcome a large housing deficit, and jump-start its
slow pace of urbanization. In Indias housing sector, retail sales of cement account for 60 to
65 percent of cement demand, with bag cement comprising the bulk of sales. As a result,
penetration of transformation channels, such as ready-mix cement (RMC), is limited and
accounts for less than 10 percent of total cement demand.
The winds are changing, though. During the past 15 years, global eforts to improve the quality
and consistency of blended cements have contributed to a remarkable shift in demand in the
Indian cement industry from ordinary portland cement (OPC) toward blended cement. The use
of blended cement has not only increased the consumption of large amounts of industrial
waste, such as fly ash and slag, but also reduced carbon dioxide emissions.
Indias cement business has become more organized and structured, with consolidation and the
average size of players increasing steadily. Growing scale, coupled with improved manufacturing
technology, has led to significant cost eficiencies as well. In addition to growing power and
thermal energy eficiencies, labor productivity has improved: Turnover per employee increased
by more than 90 percent between 2006 and 2012.
1
Yet other forces have come into play. During the past five to six years, supply-side bottlenecks
have intensified. The share of linkage coal in the overall energy mix declined from 65 percent
in FY06 to 35 percent in FY12, leading to increased dependence on alternative sources. The
need for quality logistics infrastructure (especially railways), a shortage of skilled construction
labor, and delays in getting land and environmental clearances make setting up much-needed
additional capacity dificult. High taxes on cement (up to a third of the retail price) have raised
the delivered cost to the customer. These factors, combined with the higher costs of fuel and
financing, have put enormous pressure on the cost of cement manufacturing, which has risen
8 percent annually during the past four years, despite the achieved eficiencies.
1
Average turnover per employee has been calculated for six companies, which represent more than 50 percent of industry capacity.
During the past two years, sluggish demand has afected cement players ability to pass cost
increases on to the customer. While cement prices have increased by a 4 percent compound
annual growth rate during the past five years, operating and capital costs have risen at greater
rates. This has sharply impacted the profitability and internal rate of return (IRR) of cement
plants. At the current pricing and cost structure, the implied IRR of a greenfield cement plant
commissioned in 2012 is estimated to be as low as 9 to 10 percent.
2
Strong potential and significant challenges
Cement industry growth during the next decade looks very promising. Cement demand is
projected to grow to 2.5 to 2.7 times the current volumes and reach 550 to 600 MTPA by 2025. Per
capita cement consumption is likely to increase from 185 kg currently to 385 to 415 kg in 2025.
3

This growth will likely be led by investments in the infrastructure sector, with subsectors such as
roads, power, and irrigation leading the charge. By driving increased cement usage in these
infrastructure projects (roads, power, and irrigation), the industry can achieve the full potential of
cement demand growth. Residential demand will be driven by increasing urbanization, a rise in
the number of nuclear-family households, and upgrades from non-pucca to more permanent
pucca houses, many of which are built with concrete. The residential sector will remain one of the
largest consumers with 42 to 45 percent of total demand in 2025, but also will likely see increased
consolidation among real estate players.
These changes will lead to a significant shift in the overall cement customer mix. The share
of large and direct buyers (contractors and developers) is expected to increase from
30 percent currently to 70 percent by 2025. This shift will have three key implications for
the cement sector:
Changes in product preference. The share of OPC could increase in the future since large
institutional buyers and RMC players prefer buying OPC and do in-house blending because of
favorable cost economics.
Shift in mode of delivery, higher demand for RMC, and bulk. Demand for RMC could reach 25
percent of total cement demand by 2025. This would also afect demand for bulk cement; it is
expected to reach 20 percent of total demand by 2025.
Higher sophistication in selling and delivering. Timely onsite delivery, technical competence,
relationship management, and transparency in credit and commercial terms would become
more important.
Resource requirements will also rise. An additional capacity of 330 to 380 MTPA for cement
and 240 to 270 MTPA for clinker could be required by 2025, translating to an investment of
close to Rs 300,000 crore. An unattractive tax and infrastructure environment would make it
dificult to bring in this investment. In addition, continuous improvement would strengthen the
industrys operating cost structure by reevaluating asset footprints, increasing automation,
improving power and thermal eficiency, and striving toward leaner organizational structures.
Energy security will become a key concern for the industry. Proactive use of waste heat
recovery (WHR), alternative fuels and raw materials (AFRs), and renewables will become
important alternatives to domestic coal. The split between imported coal and petcoke (both
domestic and imported) will be governed by prevailing market prices and availability.
2
The cost structure has been obtained from a representative industry sample from analyst reports and through expert interviews.
3
The growth rate of cement consumption is expected to gradually drop from about 6 percent in 2025 to a steady-state value of about
2 percent in 2060.
Improving energy eficiency of clinker and cement manufacturing will be important. So will
improvement of the clinker factor by increasing blending levels in portland-pozzolan cement
(PPC) and portland slag cement (PSC) and promoting the use of low-grade limestone
(portland limestone cement) and alternative materials for blending. Government support
through mechanisms for fair and transparent pricing of fly ash would help as well.
The depletion of natural reserves of limestone and gypsum will lead to supply constraints and
increased dependence on imports.
4
The industry would likely benefit from proactively securing
access to overseas coal and gypsum assets, either through acquisitions or tie-ups. The govern-
ments easing of import duties on both these key raw materials would help. Moreover, streamlining
the land acquisition process for greenfield expansion would have a positive efect.
The transportation of raw material and cement will severely constrain Indias cement business.
Active government measures will be required to increase rake capacity and improve road and
rail infrastructure in particular. Finally, the industry can avoid a skill gap by proactively
addressing the growing need for skilled manpower (both blue and white collar).
Vision 2025
With proactive measures and government support in place, the industrys long-term vision will
be built on three pillars:
Support the building of modern India. Infrastructure and housing will be essential building
blocks for modern India, and high-quality cement and concrete at cost-efective prices will be
prerequisites for both sectors, requiring the industry to build adequate supply capacity to meet
the demand. To ensure viable added capacity, continuous eforts to improve cost eficiencies
will be crucial. In addition, advancements in product oferings (value-added products), the
distribution model (bulk delivery), and structural design and specifications can help promote
best-in-class construction practices. The industry can be a role model for other processes and
manufacturing industries by developing best practices while using state-of-the-art technology
for cement production and application.
Secure long-term energy requirements in a cost-efective, sustainable manner, and emerge
as a world leader in sustainability. Long-term growth in cement production will result in a
corresponding increase in thermal and electrical energy requirements for the sector. The
supply of coal, the preferred source for thermal and electrical energy, is already bottlenecked.
In addition, the impact of eficiency improvements is slowly plateauing. The industry can
overcome these factors by working creatively to further improve energy eficiency while
increasing adoption of alternative energy sources. Investments in strong local R&D capabilities
can help keep up withif not remain ahead ofglobal advancements in technology while using
the industrys increasing scale to push eficiency to the next level.
Become one of the most admired industries among core sectors. The cement industry has
directly contributed to the nation with taxes and jobs. Indirectly, it has contributed by devel-
oping communities in several remote areas, acting as a sustainable outlet for hazardous waste
material, and taking big strides to improve safety standards for its workers. The industry has the
potential to become even more appealing to employees, communities, and other stakeholders
by becoming an end-to-end solution provider for customers and ofering good long-term
returns for shareholders.
4
The inferred and reconnaissance reserves usable by the cement industry could sustain demand until 2070 if the reserves become
economically viable through technological, economic, or environmental advancements.
Historic Journey of the Industry
Emergence of the worlds second-largest cement industry
The Indian cement industry traces its history to 1904, when South India Industries opened the
first plant in Washermanpet, near Chennai (see figure 1). Since then, the industry has grown to
become the second-largest in the world and is a pillar of economic growth in India, with signif-
icant contributions in value creation, employment generation, and social development. Through
upgrades and the assimilation of the latest technology, the industry has also achieved strong
operational eficiencies, enabling savings in energy, fuel, and non-renewable resources.
The industry has evolved in three distinct phases, characterized by the extent of
government regulation.
Complete government control (19561982). Prices were regulated by the government. This
period saw modest growth of 6.6 percent in overall demand on a very low starting base, with
the prior decade facing a sharp slowdown in both demand and capacity creation. Entry of new
players was limited because of suboptimal returns on investment.
Sources: Centre for Monitoring Indian Economy; A.T. Kearney analysis
Figure
History of Indias cement industry
`CA
The irst cement
plant setup was
attempted in a
small factory in
Washermanpet,
near Madras, by
South India
Industries Ltd.
The factory did
not succeed
`À `2A`2 òÀ
The Cement Era began
Indias irst commiss-
ioned cement plant was
set up by the India
Cement Company in
Porbandar with a
capacity of ,
tonnes
Two more plants were
built in Katni, Madhya
Pradesh and in Budni,
Rajasthan
By , cement
companies had been
built with a capacity of
, tonnes
Overcapacity and
prejudice against Indian
cement led to a price war
In , the Concrete
Association of India was
formed to promote
cement usage
h 16, 1C conpahies
nerged to forn Assooiated
Cement Companies (ACC)
h 17, the Dalmiya-Iain
Group set up five plahts with
a capacity of /,ooo tonnes,
ahd ACC added four plahts
This resulted ih ahother price
war, ahd the ihdustry was
brought uhder state prioe
and distribution oontrol
By 1A7, 18 uhits were
producihg 1. million tonnes
per year (MTPA)
``ò
By 1C product-
ioh had reached
z.z MTPA
Durihg the first
Five Year Plah,
ceneht product-
ioh rose fron 2.2
to .S MTPA
By the ehd of the
first plah, hdia
had z/ oement
plants with a
oapaoity of about
MTPA
ò`82 `82`8 `82C`
h the secohd plah
period (16161), total
capacity rose to about
p.z MTPA ahd the
number of units
inoreased to
By 182, total productioh
had reached 1S. MTPA
This was a period of
oomplete government
oontrol over price ahd
distributioh
To trigger growth, the
goverhneht ihtroduced
a systen of partial
deoontrol ih 182
Conpahies were free
to sell . peroent of
productioh ih the opeh
narket, with a oeiling
prioe
By 188, both the quota
(up to 7C perceht) ahd
the oeiling prioe rose
substantially
h 18, the ihdustry was
cohsidered to be ready for
free-narket conpetitioh, ahd
all prioe and distribution
oontrols were withdrawn
The ihdustry grew rapidly,
with productioh ihcreasihg
fron MTPA in 1ppo to
zzo MTPA in zo1z
Partial government control: the quota system (19821989). To trigger growth in the industry
and support emerging Indian infrastructure, the government introduced a system of partial
deregulation in 1982. The new law required at least two-thirds of all sales to be to government
and small developers; the companies were free to sell all remaining product on the open
market at a ceiling price. The industry responded through moderate growth in capacity. By
1988, both the quota and the ceiling price were increased substantially, resulting in a growth
increase of 8.2 percent.
Free cement market (1989present). In 1989, all price and distribution controls on the sale of
cement were withdrawn, and the industry was deregulated by 1991. This resulted in a massive
expansion of cement capacity, which has only accelerated as the country has developed.
Robust demand growth and proactive capacity creation
The cement industry has been a strong benchmark for overall growth of the economy.
Since independence, the increase in cement demand (7.2 percent CAGR) has consistently
surpassed the growth of the overall economy (4.8 percent CAGR) in real GDP. Growth has
been even stronger since deregulation in 1982. The continued increase in cement demand
has attracted significant investment from the private sector. Spurred largely by rapid
growth in the housing sector, this demand is representative of the developing phase of
the countrys economy.
The secular, or long-term, growth in cement demand has attracted a number of global cement
majors and Indian conglomerates to the Indian market, particularly after deregulation.
Consequently, capacity has been ahead of demand and the surplus capacity has ensured that
dependence on imports has been very low (see figure 2 on page 8). With this growth, India has
become the second-largest cement-producing country in the world, accounting for close to 6
percent of total global production in 2012.
Significant contribution to economy and society
The industry has contributed significantly to the growth of the Indian economy beyond just
providing raw material for construction. The sector has also been an active contributor to
government and community. In addition, the industry has been a manufacturing sector leader
in setting benchmarks for safety standards and measures.
Contributing to government. In 2012, the cement industry accounted for 1.5 percent of total
GDP and 5 percent of total tax revenue collected by central and state governments.
Generating employment. The industry provides direct employment to more than 150,000
people. Additionally, the various upstream and downstream processes employ more than
a million people. Key upstream industries include suppliers of input materials such as coal,
limestone, gypsum, sand, fly ash, and slag, and equipment and capital goods suppliers
and service providers such as transporters and bulk carriers. Similarly, some of the major
downstream employers are RMC producers, wholesalers, retailers, transportation and
logistics providers, and advertisers.
Contributing to society. The industry has been a leader in corporate social responsibility,
contributing in particular to developing local communities in several subpar regions near
cement plants. Cement companies have set up community centers in several villages to
improve basic facilities, provided vocational training, set up hospitals, and provided support
to farmers.
Promoting environmental awareness. The cement industry has been acting as an active sink
for environmentally hazardous materials including slag and fly ash from various producing
industries such as power and steel, the disposal of which would have otherwise occupied land
and adversely harmed the environment.
Setting an example in safety. Significant steps have been taken by the industry to improve
safety standards. The past three years have witnessed a decrease in the lost time injury
frequency rate (LTIFR) of more than 60 percent, which has set an example for other process
industries.
5
ACC Limited, for example, has been able to reduce LTIFR from 65 to 34 in the past
two years. Similarly, Shree Cement achieved a reduction of 71 percent in the same period,
progressing from 42 to 12.
5
Calculated as an average of reduction rate in LTIFR for UltraTech Cement, ACC Limited, Ambuja Cement, and Shree Cement
Notes: GDP figures ihdicated are the GDP at factor cost with a base year of 2CCA2CC. MTPA is nillioh tohhes per year.
Figures nay hot resolve due to rouhdihg.
Sources: Cehtre for Mohitorihg hdiah Ecohony; A.T. Kearhey ahalysis
Figure 2
lndias oement oapaoity has kept ahead of demand
FY1z FYoz
CAGR
(`22C`2)
GDP
.p%
Capaoity
/./%
Demand
/.z%
FYpz FYS/ FYSz FY/z FYSz FYz
GDP ./%
Denahd S.S%
Capacity /.%
2,A6
8,AA
,7
A,2C
2,861
C
A
p
zo
A
16
z
8
2A
S
1
S/
1
1
6
z
1C
221
2A,721
1,672
1C,76
1
Excess capacity (MTPA)

Real GDP (billioh rupees)
Denahd (MTPA)
CAGR (FY2FY82)
GDP .p%
Denahd S.z%
Capacity /.S%
CAGR (FY82FY2)
GDP /.o%
Denahd /.%
Capacity S.z%
CAGR (FY2FY`2)
Considerable room for growth
India has the second-largest cement market in the world in terms of cement production and
demand (see figure 3). However, the countrys economy ranks near the bottom in cement
consumed per unit GDP when compared to other economies at similar prosperity levels (see
figure 4 on page 10).
6
Indias cement intensity is significantly lower than those of high cement-
intensive countries, such as China, Turkey, Korea, and Italy. When compared with low cement-
intensive countries, Indias cement intensity is close to average, indicating there is room for
growth in cement demand.
1
PPP is purchasihg power parity. GDP values used for calculatioh are based oh curreht ihterhatiohal dollar (PPP ad|usted) for 2C12.
2
Percehtage for 2C1C
Sources: Socit Ghrale, CRSL, SNC Brazil, World Bahk, Fredohia Group, British Ceneht Associatioh, CA World Factbook; A.T. Kearhey ahalysis
Figure
India is the worlds second-largest cement market
Total cement production

(million tonnes)
China
2,1C
India
221
United
States
7
Brazil
68
Indonesia
Italy
2
Cement intensity
(grams per GDP PPP)
168.A A7.7 .C 2.1 A.A 12.1

Share of housing 2% 6% 22% 6% 72% 6%
Share of infrastructure A% 21% 6% 2% 12% 2%
Ready-mix concrete
penetration
%
2
8% 88% 2% 16% 6A%
Bulk cement penetration A6% 2% % % AC% 78%
6
See also the table in the appendix: GDP at purchasing power parity for relevant countries.
Three primary factors have led to low cement intensity in India:
Low infrastructure intensity. The economy has grown as a result of the services sector and
retail consumption rather than manufacturing or infrastructure. In contrast, high cement-
intensity economies such as China, Korea, and Turkey have a greater share of demand coming
from investments in infrastructure and manufacturing. The average gross capital formation
(GCF) was 32 percent of GDP in India over the past five years compared to 39 percent in China
at similar prosperity levels.
High level of housing deficit. Although the housing sector accounts for 63 percent of cement
demand in India, the residential demand has still not realized its full potential. Currently, more
than 30 percent of the urban population and more than 50 percent of the rural population do
not have access to cement (pucca) houses.
Low pace of urbanization. While India has seen increasing urbanization over the years, the
rate of urbanization is significantly lower than in other comparable markets. For example, the
urban share of population in China grew from 26 percent in 1990 to 52 percent in 2012. Over
the same period in India, the urban share grew from 25 percent to just 32 percent. Brazil also
saw a higher rate of urbanization (from 73 percent in 1990 to 85 percent in 2012).
Indias unique cement demand profile: customer, channel, and product mix
The profile of cement demand in India is diferent than in other large economies. End usage of
cement is dominated by the residential sector, with retail customers accounting for the bulk of
the customer base. Cement is sold predominantly in bag form through traditional trade and
retail channels, with transformational channels such as RMC accounting for less than 10 percent
of total sales. The product mix has undergone a significant change over the past couple of
decades, with sales of blended cement increasing steadily to gain the dominant share.
Dominance of residential segment and trade channel
The residential segment, dominated by individual home buyers, accounts for 63 percent of total
cement demand. Urban centers account for 60 percent of this demand, partly because of
increases in afordability, urbanization, and the number of nuclear families.
Notes: Ahhual rate of urbahizatioh is the ahhual ihcrease ih the percehtage of urbah populatioh, calculated usihg data fron five years before the year showh
for each couhtry. For exanple, for Chiha it is for 2CCC2CC, ahd for hdia it is 2CC72C12. GCF is gross capital fornatioh. PPP is purchasihg power parity.
Sources: .S. Geological Survey, SNC Brazil, World Bahk; A.T. Kearhey ahalysis
Figure A
lndias oement intensity is lower than in similar eoonomies
Cement intensity (oement oonsumption]GDP PPP)
grams per , per capita GDP level at , (current international , PPP)
High oement-intensity oountries
High oement-intensity oountries:
Average ceneht ihtehsity: 11 grans per $
Average GCF as % of GDP: 2%
Average ahhual rate of urbahizatioh: 1.6%
Low oement-intensity oountries:
Average ceneht ihtehsity: A8 grans per $
Average ahhual rate of urbahizatioh: C.6%
Chiha
2CC
1p/
Korea
18A
11o
Turkey
1C
p
taly
1
/
rah
182
p
Mexico
181
S
1apah
16
Malaysia
188
1
lndia
zo1z
/
hdohesia
2CC
Colonbia
1C
z
Chile
18
1
Brazil
18
/
Low oement-intensity oountries
Infrastructure and commercial segments account for the remaining 37 percent of demand.
While the infrastructure segment has seen increased demand recently, the growth rate is still
much lower than expected. Lower usage of cement in two sub-segmentsroad and irrigation
has limited demand in infrastructure.
The commercial segment includes demand from construction of retail space (both unorganized
and organized, such as malls and shopping complexes), ofice buildings, hospitals, educational
institutions, and industrial construction such as plants, warehouses, and depots.
Dominance of demand from the residential sector is similar to that of emerging markets such
as Brazil and Indonesia (see figure 5). However, other emerging markets, such as China, and
developed markets, such as the United States and Italy, have a much higher share of demand
(60 to 80 percent) from infrastructure and commercial segments.
Sources: CRSL, Socit Ghrale; A.T. Kearhey ahalysis
Figure
Most of Indias demand for cement is residential, similar to other emerging economies
Cement use in
Per capita
cement consumption
18 kg 22 kg A6 kg 1, kg AC2 kg 2C kg
Emerging economies Developed economies
hdia
6%
16%
21%
hdohesia
72%
16%
12%
Brazil
6%
1%
2%
Chiha
2%
C%
A%
taly
6%
%
2%
hited States
22%
22%
6%
Residehtial
Connercial
hfrastructure
There are three major types of cement buyers: retail buyers, institutional buyers, and
convertors (RMC or concrete products). Retail buyers make up the largest segment in India,
accounting for nearly 60 percent of total cement purchased. Cement is sold to these buyers
through intermediaries such as traders, wholesalers, and retailers.
Institutional buyers include the builders and contractors of medium to large real estate,
infrastructure, and commercial projects, and large industrial buyers that purchase directly
from cement companies. These account for around 30 percent of total cement demand.
RMC and other transformational players that convert the cement into various products such
as RMC or mortar are the smallest buyers of cement in terms of overall volume. Share of
transformational channels is 6 to 8 percent in India, much lower than in other emerging
markets such as Indonesia and Brazil. The customer mix in India is in sharp contrast to the
mix seen in developed countries (see figure 6). In these markets, transformational channels
such as RMC and concrete products provide the primary customers.
Sources: Fredohia Group, British Ceneht Associatioh; A.T. Kearhey ahalysis
Figure 6
The retail channel dominates the customer mix in India, consistent with other
emerging economies
Customer mix,
Emerging economies Developed economies
India
6C%
2%
8%
Indonesia
6%
1%
16%
Brazil
%
1%
2%
Italy
22%
1A%
6A%
United States
6%
6%
88%
Retail
hstitutiohal
Cohcrete ahd
ready-nix products
The residential segment, dominated by
individual home buyers, accounts for
63 percent of total cement demand.
Customer preference for RMC in these markets is a result of the numerous benefits it ofers:
better quality control, faster speed of construction, more environmental friendliness, lower labor
requirement, reduced waste, and lower procurement complexities and storage space. Concrete
products such as concrete blocks, bricks, floor and wall panels, pipes, and architectural facades
are also more popular in the developed markets. The organized nature of the aggregates
market in these countries makes it easier for cement players to operate RMC plants profitably,
which has helped develop the supply market of RMC in line with growing demand. Bag
cement accounts for roughly 95 percent of cement sales in India. This, too, is in sharp contrast
to developed countries such as the United States, Germany, Canada, and Australia, where the
majority of cement sales are in the form of bulk cement. India lacks the infrastructure (bulk
terminals, bulk carriers, and silos for receiving bulk cement) required for handling bulk
cement, which limits this segments share.
Product mix: Shift from OPC to blended cement
In the past 15 years, the Indian cement industry has seen a remarkable shift in demand toward
blended cement and away from OPC. Blended cement is produced by mixing natural or fabricated
compounds, such as pozzolana or slag, into the portland cement clinker. Blended cements have
a much lower environmental impact because of low clinker content (see sidebar: Use of Fly Ash).
PPC and PSC are the most common types of blended cements used in India. PPC is formed by
adding fly ash (PPC contains 25 to 35 percent fly ash), while PSC is made by replacing clinker
content with granulated blast furnace slag (PSC contains 25 to 65 percent slag).
The product mix has evolved significantly in the past two decades. OPC, which accounted for
almost 70 percent of total cement production in 1995, has seen a steady decline in share and
now accounts for less than 30 percent of total production (see figure 7). In the same period, the
share of blended cement increased from 29 percent to more than 70 percent. The migration to
blended cement has been enabled through strong industry-level eforts to improve the quality
and consistency of blended cements coupled with the widespread availability of blending
material, especially fly ash. As a result of technological advances and process control, the
industry now makes blended cement that has performance levels similar to OPC.
Use of Fly Ash
Blended cement is more environ-
mentally friendly than OPC
because blended cement has a
lower clinker factor (percentage
of clinker used in production of
cement) and thus requires much
less energy to produce. Blended
cement uses fly ash, which is
produced from thermal power
plants. This helps reduce the
disposal costs of fly ash by
efecting a 30 to 40 percent
reduction in the land required for
the power projects toward ash
handling. (A one-gigawatt power
plant requires around 1,000
acres of land for a 25-year period
for storing fly ash.) The cement
industry plays an important role
in the disposal of this harmful
waste as it uses nearly 30
percent of the fly ash produced
in India.
7C%
1%
11%
6%
26%
11%
A2%
C%
8%
2%
67%
8%
28%
6%
7%
Sources: CRSL; A.T. Kearhey ahalysis
Figure 7
The produot mix in lndia has shifted toward blended oement
Million tonnes per year
Sz 1oo 11 1/z zz1
FYp FYoo FYo FYoS FY1z
Ordihary portlahd ceneht
Portlahd pozzolaha ceneht
Portlahd slag ceneht
Improvement in operational eficiency and technology
The industry has made significant gains in cost eficienciesboth thermal and electrical energy
requirements have dropped significantly (see sidebar: Mitigating the Impact on the Environment).
The average thermal energy usage has fallen by more than 17 percent over the past two decades,
from 876 kcal per kg in 1991 to 726 kcal per kg in 2009.
7
Similarly, average power consumption has
also dropped, falling nearly 34 percent in the same period (from 120 kWh per tonne in 1991 to 79
kWh per tonne in 2009). India is currently one of the most eficient cement industries in the world
in terms of both thermal and process eficiencies (see figure 8 on page 15).
The cement industry has also reduced the consumption of clinker and limestone per tonne of
cement produced by almost 12 percent in the past 10 years. This reduction has been made
possible primarily through the shift from OPC to blended cement.
Mitigating the Impact on the Environment
Gains in thermal and process
eficiencies have led to rapid
reduction in the overall CO2
emissions from the cement
sector. The average gross CO2
emission from production of
cement has declined steadily
from approximately 800 kg per
tonne in 1990 to approximately
600 kg per tonne in 2011.
In terms of CO2 emissions
intensity, India is ahead of most
other countries, including the
United States, European
countries, Middle Eastern
countries, and China, and
behind only select South
American countries (see figure).
Figure
Carbon dioxide emission intensity of Indias cement sector has dropped
Average gross CO
emissions
in India
(kg per tonne cementitious material)
Global average gross CO
emissions
(kg per tonne cementitious material)
8CA
726
6C
7
2
6C
626
62
67
7A
%
Notes: Data was collected ohly for participahts ih the Gettihg the Nunbers Right ceneht sustaihability ihitiative. Enissioh hunbers ihclude direct enissiohs
fron clihkerizatioh process ahd captive power plahts ahd ihdirect enissiohs fron grid power.
Sources: World Busihess Couhcil for Sustaihable Developneht; A.T. Kearhey ahalysis
Brazil South America
excluding Brazil
India Europe China Middle
East
North
America
7
The overall annual demand for energy (thermal and power) has been calculated based on industry-weighted averages for specific
thermal energy and electric intensity. The 2012 value for industry-weighted average specific thermal energy has been taken as roughly
730 kcal per kg clinker, and industry-weighted average electric intensity has been taken as roughly 80 kWh per tonne of cement.
Labor productivity has also seen substantial improvement. The industrys average turnover per
employee increased by more than 90 percent between 2006 and 2012, as a result of increased
automation, mechanization, and plant modernization.
8
Three factors have been instrumental in achieving the above-mentioned gains:
Improvements in manufacturing technology
The cement industry has seen significant improvements in manufacturing technology over the
past three decades. An important contributor to this improvement has been the shift from the
energy-intensive wet process to the much more eficient dry process (see figure 9 on page 16).
While the wet process is extremely energy intensive, with a specific consumption of 1,200 to
1,800 kcal per kg, the dry process is more eficient, with dry kilns having higher capacity and
lower energy consumption (800 kcal per kg).
Apart from the conversion to the dry process, energy eficiency has improved as a result of
several advancements in kiln technology, including four to six preheater stages, precalciners,
after-coolers, high-eficiency grate coolers, and multichannel burners. Most of the major plants
today use rotary kilns with five or six preheater stages. Improvements in power eficiency have
largely been the result of vertical roller mills, roll presses, high-eficiency two-stage modular
separator systems, high-eficiency motors and fans, and eficient illumination systems.
Notes: Nunbers are calculated as a weighted average of data fron AC dry plahts. Kcal is kilocalorie. KWh is kilowatt hour.
Sources: Natiohal Couhcil for Ceneht ahd Buildihg Materials; A.T. Kearhey ahalysis
Figure 8
lndia has one of the worlds most effioient oement industries
Energy use
(Kcal per kg of clinker)
1pp1
876
1ppp
771
zoo
72
zoop
726
lndia
best
687
World
best
6C
Power oonsumption
(KWh per tonne of cement)
1pp1
12C
1ppp
1C2
zoo
8
zoop
7
lndia
best
67
World
best
6
1/% %
8
Average turnover per employee has been calculated for six companies, which represent more than 50 percent of industry capacity.
An increase in plant scale
The cement industry has witnessed a remarkable increase in operation scale thanks to plants
and kilns with greater capacity. The average kiln capacity has increased from 285 tonnes per
day (TPD) in 1950 to 3,305 TPD in 2010 (see figure 10). The average installed capacity of the top
five players also increased from two MTPA in 1982 to 29 MTPA in 2012, a development that has
helped the industry become more eficient and more cost competitive. Consolidation has
played an important role in enabling the industry to increase scale: The market share of the top
five players increased from 30 percent in 1982 to 50 percent in 2012. Significant M&A activities
and large capacity expansion by the top players has led to an increase in consolidation.
Note: Figures nay hot resolve due to rouhdihg.
Source: A.T. Kearhey ahalysis
Figure
Cement plants have moved toward more effioient dry prooess teohnology
Total oement oapaoity based on prooess teohnologies
1po
7%
1pSo
%
A%
1p/o
%
7C%
22%
1pS
6%
A1%
%
1pp
86%
12%
zoo1
%
zo1o
%
Seni-dry process
Wet process
Dry process
% 2% 2% 1%
C%
%
1% C%
Figure 1C
Greater kiln oapaoity has resulted in higher soale effioienoies
Average kiln oapaoity
(tonnes per day)
1po
28
1pSo
8
1p/o
A6
1pS
626
1pp
1,22
zoo1
1,21
zooS
2,A17
zo1o
,C
Greater control over the raw material supply through backward integration
Most cement companies have increasingly integrated backward to secure access to vital raw
materials such as limestone and gypsum. India has suficient domestic limestone reserves.
9

Current limestone reserves (proved and probable reserves) and the remaining resources that are
usable by the cement industry (feasible, pre-feasible, measured, and indicated) are expected to
sustain demand until 2045. Most cement companies meet their limestone requirement through
captive domestic mines. Domestic reserves of gypsum are limited, however, which has led some
cement companies to explore the option of acquiring overseas gypsum mines. In addition to
gypsum, the domestic coal supply has also become a major bottleneck. As a result, cement
companies are looking to secure access to coal, either through joint ventures with overseas
players or through the acquisition of overseas coal mines.
Backward integration has allowed the cement industry to have greater control over the supply and
cost of key raw materials, mitigating the efect of rising raw material prices in the open market.
Supply-side challenges and impact on business model and economics
Even as the industry has grappled with a number of challenges, it has improved its eficiency to
the extent of heading of cost pressures. As a result, cement price hikes have remained below
overall inflation and below the increased prices for other similar commodities. Over the past five
years, however, the pressures of input material constraints and cost increases have outweighed
the improvements possible through technology.
Cement price rise contained below overall inflation
Over the past three decades, cement prices have risen at a rate lower than overall inflation.
While the overall inflation has increased at a CAGR of 6.9 percent, the increase in the cement
price index has been lower (5.7 percent CAGR). In the past four years, cement prices have risen
by only 3.8 percent, compared to an 8.1 percent rise in overall inflation (see figure 11).

Used by the government of India as a measure of inflation; reference year

Rail freight data indicated for train load with booking for a distance of kilometers
Sources: Ministry of Commerce and Industry, India Labor Bureau, IndiaStat, Ministry of Commerce and Industry; A.T. Kearney analysis
Figure
Cement prioes have risen more slowly than oost elements and overall inflation
Variation of wholesale prioe index
1
FYSz FYS FYSS FYSS FYpo FYpz FYp FYpS FYpS FYoo FYoz FYo FYoS FYoS FY1o FY1z
Diesel
Wage rates
Coal
Power
Overall inflation
Rail freight
Cement
9
At the beginning of FY11, India had about 125,000 million tonnes of reserves and resources (includes both usable and unusable by the
cement industry): 24,500 in the North, 17,000 in the East, 61,000 in the South, and 22,500 in the West.
As highlighted earlier, technology and process improvementsenabled by the proactive
initiatives of the Indian cement industry in incorporating best-in-class technology in all
manufacturing plantshave helped curb a sharp rise in the ex-factory price of cement. The
impact of these improvements can be visualized in a scenario wherein, had they been absent,
cement prices would have been nearly 30 to 40 percent above the current prices. Most
cement plants established in India in the past 10 to 15 years have eficient and green
technologies that are comparable to any in the world.
The price rise in cement has been much lower than the increase in the prices of essential inputs
over the years. Not only has the industry managed to allay the price of cement vis--vis these
inputs, it has also been successful in moderating its prices compared to other essential goods
such as steel, copper, crude oil, silica sand, plastic products, and aluminum (see figure 12).

Used by the government of India as a measure of inflation

Wholesale price index (WPI) for copper and brass rods is used.

WPI for cement is used up to ; after , WPI for grey cement used.
Source: A.T. Kearney analysis
Figure
Cement prioes have risen more slowly than for other oommodities
Variation of prioe index
1
FYSz FYS FYSS FYSS FYpo FYpz FYp FYpS FYpS FYoo FYoz FYo FYoS FYoS FY1o FY1z
Copper
Steel
Crude oil
Aluminum
Silica sand
Cement
Plastic products
Supply constraints have increased
Although cement is an essential commodity required for the economic development of the
country, it does not get priority status in terms of resource allocation. This has often led to
supply crunches, which have resulted in increased procurement costs for the industry. Some of
the prominent supply bottlenecks are discussed below.
Coal availability. Coal is crucial for both the primary calcination process and the captive power
plants attached to cement plants. Almost 160 kg of coal is consumed per tonne of cement
production. The domestic supply of coal is channeled through public-sector coal mining
companies via linkages and fuel supply agreements. The share of linkage coal has steadily
declined over the past five to six years because of inadequate domestic supply and the declining
share of linkages due to the non-preference of the cement sector versus other essential sectors
such as power, steel, and fertilizers (see figure 13 on page 19). This has caused a major shift in the
coal procurement strategies to imports, open market transactions, and alternative fuels.
The usage of petcoke (a by-product from oil refineries) is emerging as a viable alternative to the
supply-constrained domestic coal, due to its higher calorific value compared to domestic coal
and favorable cost economics in comparison to coal imports.
Dependence on captive power plants. Nearly 60 percent of the cement industrys power
requirements is currently met through captive power plants (CPP), and this trend is expected
to remain unchanged in the near future as well.
While this alternative removes the unreliability and fluctuations associated with grid power, it
is less process eficient than grid power (the average national heat rate of CPPs is about 20
percent higher than that of thermal power stations which produce grid power). Also, the high
capital costs which have already been incurred by the cement companies in setting up their
own CPPs has created an inhibition to further capital investment in alternatives such as
renewable energy sources.
Gypsum availability. India has a paucity of gypsum resources, which does not bode well for
the cement industry. An essential, non-substitutable raw material, gypsum is required for all
varieties of cement production. The production deficit in the domestic market has led to
increased dependence on imports and synthetic gypsum to meet production demands.
Rail logistics. Logistics accounts for a large part of the overall costs for a low-value, high-
volume product such as cement, which necessitates the requirement of cheap transportation
infrastructure such as railways. The structure of the cement industry, which has processing
centers close to resource mines and distribution centers close to consumption markets,
further increases the need for long-distance transportation by rail.
Despite the cost and environmental benefits of transporting material over long distances via
rail, the railways share of transportation for the cement industry has gone down, falling from
roughly 57 percent to about 35 percent in the past decade.
10
8%
1% 11%
16%
18%
1p z zp zS o
Notes: The figures fron 2CC2C1C ohward exclude ACC ahd Anbu|a Ceneht's data. Figures nay hot resolve because of rouhdihg.
Figure 1
Availability of linkage ooal has been dropping for the oement industry
% million tonnes per year
nport
Lighite ahd petcoke
Opeh narket
Agaihst lihkage
FYo
%
7C%
FYoS
7%
6%
FYoS
C%
FY1o FY1z
26%
A1%
17%
1%
2%
%
17%
1%
21%
17%
10
See Cost-Efective Green Mobility at www.atkearney.com.
The major constraints faced by the cement industry with regard to railways infrastructure have
been inadequate rake supply, insuficient terminal infrastructure, and high loading and
unloading lead times.
Road transport. The road transportation industry is very fragmented, with a lack of large
organized players that ofer high service levels. Due to manual loading and highway conges-
tions, the turnaround time for trucks is also fairly high. Increasing diesel prices have further led
to increases in road logistics costs.
Waterways. Transporting commodities such as cement and clinker is most fuel-eficient and
least environmentally damaging when done through waterways that are inland or coastal. Only
about 2 percent of overall cement is transported through these channels in India, which is far
less than that in the United States, the European Union, and China (the latter having a navigable
length of nearly 120,000 km in waterways compared to about 2,600 km in India).
Sharp increase in operating and capital expenses in past six years
These supply bottlenecks have substantially increased the production costs for leading cement
players in India. The production cost for the top nine players, which account for roughly 60
percent of the industrys capacity, grew at a CAGR of around 8 percent between FY08 and FY13
(see figure 14).
Four factors have contributed to this increase:
A sharp rise in power and fuel costs, largely because of higher coal prices
Increased raw material costs resulting primarily from a rise in gypsum cost
Steeper freight and distribution charges due to a significant rise in the price of diesel and the
industrys increased dependence on transportation via roads
Higher wage rates because of the higher demand for blue-collar manufacturing workers
Notes: Productioh costs were calculated usihg ah ihdustry sanple accouhtihg for 6C perceht of total capacity. Figures nay hot resolve because of rouhdihg.
Sources: Conpahy ahhual reports; A.T. Kearhey ahalysis
Figure 1A
Cement produotion oosts are rising aoross oost elements
(% rupees per tonne)
2%
C%
2%
,68
FYoS
28%
A%
28%
,88
FYop
27%
28%
C%
6%
8%
,71
FY1o
2%
28%
28%
7%
%
A,27A
FY11
C%
28%
27%
7%
8%
A,7A
FY1z
1%
26%
27%
7%
8%
A,8
z,So
z,Szp
,11S
,1pz
,zp
,S
FY1
CAGR
()
S.S%
1/%
S.z%
p%
/%
%
1o%
Sellihg ahd
adnihistrative expehses
Enployee costs
Other nahufacturihg
expehses
Net sales realizatioh
Raw naterials
Power ahd fuel
%
7%
%
6%
Additional cost pressures have been imposed on the cement industry due to the large increase
in the cost of capital for greenfield expansions in the period FY08 to FY13. A multitude of macro-
economic factors have resulted in a CAGR of around 6 to 7 percent between FY08 and FY13:
Increase in the imported capital equipment costs due to currency depreciation
Significant escalation in land costs
Longer lead time in construction and commissioning because of the shortage of construction
labor and delays in gaining land and environmental clearances
Upward trend in lending rates as a result of rising inflation, which forced the industry to
finance expansions through internal accruals
High taxation limits the ability to pass on cost increases
Cement is one of the highest-taxed commodities in India. The total taxes and levies include
royalties and import duties on input materials, electricity duties, value-added tax (VAT) or sales
tax, and excise duties, which constitute up to a third of the retail sale price. Additionally, duties
are imposed on the cement industry for the import of coal, gypsum, and clinker, whereas the
import of cement is duty-free. This puts domestic cement companies at a disadvantage.
High taxation puts domestic cement
companies at a disadvantage.
Taxation rates are much higher compared to most other neighboring countries, including Sri
Lanka, Bangladesh, and Nepal. Tax rates on cement in other emerging economies such as
Turkey, China, and Indonesia are also lower when compared to rates in India (see figure 15).
Sources: Planning Commission, Beijing Local Taxation Bureau, Inland Revenue Department Nepal, Bangladesh National Board of Revenue, India Revenue
Service, Turkish government, Malaysia Ministry of Finance, Indonesia Ministry of Finance; A.T. Kearney analysis
Figure
Indias cement taxes are higher than in most developing countries
Direct and indirect taxes on cement
Neighboring countries
Pakistan
%
India
%
Sri Lanka
%
Bangladesh
%
Nepal
%
Other developing countries
Brazil
%
Turkey
%
China
%
Indonesia
%
Sources: Plahhihg Connissioh; A.T. Kearhey ahalysis
Figure 16
Taxes on cement are higher than for most other core sectors in India
High-speed diesel
Value-added taxes
Excise taxes
122A% 1A16% 26AC%
Cement 12.16% 1C1% 222%
Steel A% 1C12% 1A16%
Copper A% 12% 16%
Aluminium A% 12% 16%
In addition, excise duties on cement are among the highest compared to other sectors.
Other core sectors such as coal and steel are levied at duties of around 5 percent, compared
to cement which attracts duties of anywhere between 10 and 13 percent (see figure 16).
Impact on industry profitability
Cement prices have not increased as much as production and capital costs in the past four
to five years, which has taken a toll on industry profitability.
The rate of technological improvements in the industry has been slowing down, with a large
share of the industry already employing the best available technology in terms of material and
energy eficiency. Unless the government acts to reduce the burden of escalating costs, the
benefits of incremental technology improvements will be limited and technological disruption
will be required for the industry to achieve high profitability.
While the widening gaps in operating costs and sales realization have been reducing the
average EBITDA per tonne for the industry, capital costs have been steadily rising (from an
average of INR 4,200 per tonne in 2009 to INR 7,200 in 2013). As a result, the internal rate
of return on a new greenfield cement plant in India has seen a steady decline from 17 percent
in 2008 to 9 percent in 2013 (see figure 17 on page 23). At current levels of capital cost for
a greenfield plant setup, the minimum EBITDA per tonne needed for a threshold return
of 15 percent would be close to INR 1,650 per tonne.
11
Outlook for the Cement Industry
An evolving and growing future
Strong economic growth has spurred a significant increase in Indias cement demand over
the past two decades. Although the demand growth has tapered of in the past few years, the
long-term potential remains promising, as Indias economy is expected to grow between
6 and 7 percent per year over the next decade.
11
The cost of capital expansion has ranged from roughly 3,000 INR per tonne in 2004 to roughly 6,500 INR per tonne in 2012.
Figure 18
Demand for cement is expected to grow
Consumption per capita
8
e
7A
e
18 kg 22 kg 2CCC kg 8A1 kg
e
221
2C
AC
CC
12
Ceneht cohsunptioh (nillioh tohhes per year)
Real GDP (trillioh rupees)
CAGR
.%
..%
1
Based oh the average cost of capacity expahsioh per year, assunihg ah ihvestneht period of three years ahd total plaht life of C years
Note: EBTDA is earhihgs before ihterest, tax, depreciatioh, ahd anortizatioh. RR is ihterhal rate of returh.
Sources: Conpahy ahhual reports, ahalyst reports; A.T. Kearhey ahalysis
Figure 17
EBlTDA per tonne is falling behind the desired levels for healthy returns
Desired EBlTDA per tonne for an lRR at different oapital oosts and aotual EBlTDA per tonne
(rupees per tonne)
Cost of oapital expansion
(rupees per tonne)
1,CCC
1,CC
2,CCC
2,CC
,CCC
,CC
A,CCC
1C%
1%
2C%
2%
C%
,Soo
,ooo
z,z/
1,So
1,1S
p%
A,2CC A,CC A,8CC ,1CC ,ACC ,7CC 6,CCC 6,CC 6,6CC 6,CC 7,2CC lRR for a
given
EBlTDA
1
C
CC
Required EBTDA for a particular RR
hdustry EBTDA (rupees per tohhe)
deal RR bahd the ihdustry
would heed to sustaih a
virtuous ecohonic cycle
1o%
1z%
1%
1/%
al RR bahd the ihdustry
uld heed to sustaih a
uous ecohonic cycle
EBDTA per tohhe that a greehfield plaht would heed to achieve
a specific RR oh the ihvestnehts nade to ihstall hew capacity
Aotual lRR for the industry has deolined from 1/% in zooS to p% in zo1
While residential and commercial construction will continue to spur cement demand, the
industrys real boost is expected to come from an increase in the pace of infrastructure creation
over the next 10 years. Based on estimations from each of the cement-consuming sectors,
demand is projected to grow between 2.5 and 2.7 times current volumes and reach 550 to 600
MTPA by 2025. The implied demand elasticity of 1.2 to 1.3 times GDP growth will be similar to the
average demand elasticity over the past decade (see figure 18 on page 23).
Increased consumption will help Indias cement industry evolve along the industry maturity
curve by 2025. India could even overtake developed countries such as the United States, the
United Kingdom, and Canada, where incremental infrastructure building has tapered of (see
figure 19). We expect Indias cement intensity (cement consumption per GDP) to be moderate,
falling between high-intensity countries such as China and South Korea and low-intensity
markets such as South Africa and Argentina. This trend becomes evident when examining
historical data of other economies that had similar per capita GDP levels to that of Indias
expected 2025 level of $6,900 purchasing power parity (see figure 20 on page 25). High
cement-intensive economies have higher levels of GCF, with an average of 31 percent of total
GDP, and rapid rates of urbanization, with an average annual increase in urban population of
1.6 percent in the preceding five years.
How India consumes cement is expected to change as diferent segments see diferent rates of
growth. While demand from the infrastructure sector will grow at a high annual rate (12 to 13
percent), residential demand is expected to grow at just 4 to 5 percent. At these rates, the
infrastructure sector would account for 40 percent of total cement demand by 2025. Still,
although the residential sectors share of the cement market is expected to decline, it will
C ,CCC 1C,CCC 1,CCC 2C,CCC 2,CCC C,CCC ,CCC AC,CCC A,CCC C,CCC
Cement consumption per capita (kg)
GDP per capita PPP ()
C
2CC
ACC
6CC
8CC
1,CCC
1,2CC
1,ACC
Note: PPP is purchasihg power parity.
Sources: Socit Ghrale ahalyst report; A.T. Kearhey ahalysis
Figure 1
India is expected to evolve along the cement maturity curve
Colonbia
Turkey
Nigeria
Korea
1apah
Morocco
raq
Egypt
Algeria
South Africa
Malaysia
hdohesia
Chiha
Mexico
hited
States
Cahada
Brazil
Switzerlahd
hited Kihgdon
Russia
Polahd
taly
Frahce
Spaih
Gernahy
India
Growth Stability Maturity
India
India
High ceneht-ihtehsity ecohonies
Low ceneht-ihtehsity ecohonies
Note: Connercial denahd ihcludes ihdustrial denahd.
Sources: Socit Ghrale ahalyst report; A.T. Kearhey ahalysis
Figure 21
The share of oement used for infrastruoture is expeoted to rise
Demand by oonstruotion seotor
(%, million tonnes)
6%
16%
21%
zo1z
%
16%17%
28%2%
zo1Se
C%1%
16%17%
2%A%
zozoe
A2%A%
17%
7%A1%
zoze
zz1 zpo-zp p-o o-po
Expected
CAGR
1z.o%
1.%
S.o%
.%
hfrastructure
Connercial
Residehtial
Notes: The ahhual rate of urbahizatioh is the ahhual ihcrease ih the percehtage of urbah populatioh, calculated usihg data fron five years before the year showh
for each couhtry. For exanple, for Chiha it is for 2CCA2CC, ahd for Brazil it is for 172CC2. GCF is gross capital fornatioh. PPP is purchasihg power parity.
Sources: .S. Geological Survey, SNC Brazil, World Bahk; A.T. Kearhey ahalysis
Figure 2C
Cement intensity for lndia is expeoted to be moderate
Cement intensity (per oapita oement oonsumption]per oapita GDP)
grams per , per capita GDP level at , (, PPP)
High oement-intensity oountries
High oement-intensity oountries:
Average ceneht ihtehsity: grans per $
Average ahhual rate of urbahizatioh: C.%
Low oement-intensity oountries:
Average ceneht ihtehsity: grans per $
Average GCF as % of GDP: 2A%
Average ahhual rate of urbahizatioh: C.6%
Chiha
2CC
1/p
South
Korea
18
pp
Gernahy
16
pz
taly
17
SS
1apah
17A
Sz
Frahce
171
So
Turkey
17
Malaysia
1A
//
rah
2CC1
S-Sz
lndia
zoz
S
Mexico
17
Brazil
2CC2
Chile
1
S
South
Africa
2CC2
Russia
2CCC
Colonbia
2CC
Argehtiha
12
1
zp zp
Low oement-intensity oountries
z/
1S
continue to be a dominant segment and account for a large share of demand in 2025, leading to
an Indian market that closely resembles the consumption profiles of economies such as the
United States and China (see figure 21 on page 25).
The customer mix is also expected to undergo a major shift, with the share of large institutional
buyers increasing significantly. This could lead to a change in the product mix and the mode or
form in which cement is delivered. Demand for OPC, RMC, and bulk cement is expected to rise.
Infrastructure development is crucial to increased demand
After a decade of strong growth, Indias economy has lost some momentum recently. One
primary reason is that the creation of infrastructure has not kept pace with the demands of a
growing economy. While aggressive plans have been included in the past two Five Year Plans,
execution has been delayed by policy bottlenecks regarding land acquisition, environmental
clearances, and tarif setting. Project financing issues and a shortage of skilled manpower have
also slowed progress.
Chinas infrastructure developmentparticularly in roads, railways, ports, and powerstands in
sharp contrast to that of India. For example, while India has added just 16,000 km of national
highways in the past 10 years, China has expanded its network of expressways from less than
25,000 kilometers in 2002 to more than 75,000 kilometers 10 years later. China spends $116 per
capita annually on capital investments in urban infrastructure, compared to $17 in India. For the
cement industry, the disparity between the two countries is reflected in the significant
diference in per capita cement consumption.
An infrastructure investment of between 9 and 12 percent of GDP will be required to enable
sustained economic growth in India. We expect India to spend roughly $650 billion on
infrastructure development in the 12th Five Year Plan, and close to $1 trillion and $1.4 trillion,
respectively, in the 13th and 14th Five Year Plans.
About 55 to 60 percent of that expected spending will likely go to cement-intensive activities
such as roads, bridges, power, and irrigation, which together would represent 80 to 85 percent
of the infrastructure sectors total cement demand. Thus, infrastructure will become the cement
industrys growth engine for the next 10 to 12 years (see sidebar: Higher Cement Intensity in
Roads and Irrigation Is Essential).
Higher Cement Intensity in Roads and Irrigation Is Essential
Increasing cement intensity in
roads and irrigation projects is
crucial for achieving the full
potential of cement demand
growth. Currently, only about
3 percent of roads in India are
concretized, compared to nearly
40 percent in the United States.
Although concrete roads have
higher initial construction costs
than traditional bituminous
roads, they have much lower
maintenance costs and longer
life spans and cause less wear
and tear on vehicles. For instance,
while the initial construction cost
for concrete roads (assuming a
typical pavement composition for
rural roads) is 25 to 30 percent
higher than bituminous roads, the
annual maintenance cost is
almost 20 percent lower. Over a
20-year period, the total life-
cycle cost of concrete roads ends
up 20 to 25 percent lower than
traditional bituminous roads.
Similarly, cement-lined canals
ofer benefits such as reduced
water loss from seepage,
reduced silting, and smaller land
requirements. The industry
needs to take proactive
measures to increase awareness
and prompt the relevant author-
ities to evaluate the benefits of
concrete roads and cement-lined
canals over the entire life cycle.
Demand from residential sector to remain steady
The residential sector will remain a leading consumer of cement, accounting for 42 to 45 percent
of the total cement demand in 2025. Demand growth will be driven by three main factors:
Increasing urbanization. Indias current level of urbanization (31 percent) is much lower than
other large developing markets such as Brazil (85 percent), Indonesia (51 percent), and China
(52 percent). But by 2025, Indias urban population is projected to comprise about 38 to 40
percent of the total population. Increased urbanization will lead to a growth in demand for
houses in cities, where cement has a larger penetration and the level of development is higher,
increasing overall cement demand from the residential sector.
An increase in the number of households due to nuclearization of families. The average
household size in India is about 4.7 people, much higher than in other large emerging markets
such as Brazil (3.3), China (3.1), and Indonesia (4.2). Both cultural and demographic factors
afect these numbers. While Indian society has traditionally preferred the joint (extended) family
system, it is also important to note that nearly 40 percent of Indias current population is under
the age of 18. Over the next 12 years, many of these people will become independent and create
new households as the share of people older than 18 increases from 60 percent today to 66
percent in 2025. Also, the average size of rural households will fall from 4.8 to 4 by 2025, leading
to increased demand for new houses.
The upgrade of non-pucca houses to pucca houses. Growing economic prosperity and govern-
ment focus on ultra-low-cost housing could lead to a sharp increase in pucca houses, which
consume more cement than non-pucca homes, which in turn increases the demand for cement
in the residential sector. In rural areas, the share of pucca homes is expected to increase from 46
percent today to 60 percent by 2025; in urban areas, the share will rise from 68 to 80 percent.
The share of large institutional buyers will rise
The cement customer mix is expected to undergo a major shift, with the share of large
institutional buyers increasing from 30 percent today to 40 percent by 2025. This, coupled
with an increase in the share of RMC players, could increase demand from direct buyers of
cement up to 65 to 70 percent of total demand (see figure 22).
Figure 22
The cement customer mix is expected to shift toward institutional
and transformational customers
Customer mix
(%, million tonnes)
2C12 2C2e
C%
AC%
C%
2%
6C%
Retail
hstitutiohal
Cohcrete ahd ready-nix products
8%
This shift in the customer mix will arise from two primary trends. First, there is a demand increase
from the infrastructure sector, where the largest players prefer to buy cement directly from the
cement companies or buy RMC. As the demand from this segment increases, the share of such
direct buyers will grow correspondingly. Secondly, the number of large real estate players is
increasing as the residential market consolidates and leads to growth in the size and share of
large, organized real estate players. Certain factors, such as an increase in ultra-low-cost
housing, higher growth of large real estate projects, or policies such as 100 percent foreign
direct investment in real estate, could accelerate this trend.
These developments will require cement suppliers to take into account the following factors
and adapt as necessary:
Changes in customer buying behavior and criteria. The needs and expectations of institutional
customers are very diferent than those of retail customers. Retail customers look for a trust-
worthy brand; institutional buyers seek long-term relationships and technical competency.
Retail customers prefer a standardized commodity product; institutional buyers seek more
customization and want cement companies to be solution providers. Retail customers are
highly cost-conscious and seek ready availability at the dealer level; institutional buyers want
value for money, transparent and standardized credit and commercial terms, and consistent and
timely delivery to job sites. In the future, cement companies will need to develop multiple new
capabilities to serve the changing customer base efectively (see sidebar: Shift from Commodity
Product to Customized Product).
Shift in product preference. Large institutional buyers and RMC players prefer to buy OPC and
do in-house blending, as it cuts costs. As the share of such buyers increases, the demand for
OPC is also expected to rise. A similar trend has been witnessed in the European Union, where
the construction industry uses close to 48 percent of the total fly ash production, of which
almost 40 percent is used for blending in concrete rather than cement. This increasing trend of
in-house blending has resulted in high demand for OPC in developed countries such as Italy and
the United States (see figure 23 on page 29). Although the demand for OPC from residential and
commercial sectors is expected to increase, the demand from the infrastructure sector is likely
to fall as agencies such as the National Highways Authority of India (NHAI), public works depart-
ments (PWDs), and the Ministry of Water Resources revise the infrastructure project specifica-
tions to allow for the use of blended cement for some projects. However, we still expect the
share of OPC to rise from the current level of 28 percent.
Shift from Commodity Product to Customized Product
As the Indian market evolves,
cement will undergo a transfor-
mation from a commodity to a
customized product. Currently,
cement is marketed and used
largely as a commodity, with
companies achieving limited
diferentiation based on service
and delivery and most using
similar types and qualities of
cement regardless of the use or
necessary strength. This is
expected to change, however,
with consumers using diferent
grade and quality based on usage,
and will lead to customized
products that can create diferen-
tiation based on technical
expertise. For instance, certain
value-added concrete products
already launched in the market
diferentiate by achieving greater
strength in less time, being more
decorative, being more
environmentally friendly, having
improved permeability, or
providing thermal comforts. Some
of these products have specialized
moisture-resistant packaging or
free services for customers such
as testing of ingredients, site
visits, or slab supervision. These
products and services will likely
proliferate, allowing cement
companies to diferentiate
themselves from peers.
Sources: CRSL, Ceneht Mahufacturers Associatioh of the Philippihes, Fredohia Group, British Ceneht Associatioh; A.T. Kearhey ahalysis
Figure 2
Demand for OPC cement is expected to increase
Consumption split by product
(%, million tonnes)
2C12 2C2e
India
28%
72%
C%
AC%
6C%
7C%
Philippines Italy United

States
Ordihary portlahd ceneht (OPC)
Blehded cenehts
6%
6A%
7%
27%
1%
%
The rise of in-house blending could, without adequate regulatory mechanisms and enforcement,
lead to inconsistent and inaccurate blending on site, which in turn would impact the overall
strength of the structure in the long term. In addition, since the margin on blended cement is
typically higher than OPC due to a more eficient cost structure, a shift from blended to OPC can
impact industry profitability. To maintain the share of blended cement at current levels, the
following actions would be required from key stakeholders:
Industry and influencers work together to increase awareness and promote the use of
blended cement.
Blended cement becomes more economically competitive to allow the buyer to share in the
economic gains.
Infrastructure project specifications are revised to allow usage of blended cement
wherever possible.
The tax structure and policy for blending components are revised to prevent double
taxation for buyers.
Hence, depending on what steps the industry and government take, the demand for blended
cement can vary between 30 and 40 percent.
Increase in demand for RMC and bulk cement. Large real estate and infrastructure players
increasingly prefer RMC, and as larger players continue to emerge, the demand for RMC will
also rise. RMCs share of the market will likely grow from less than 10 percent of total cement
demand today to as high as 25 percent by 2025.
The increased use of RMC will also increase the demand for bulk cement, which is expected to
reach up to 20 percent of total cement demand by 2025. Comparing Indias current and
expected bulk usage ratios with other economies reveals that India lags most other countries,
but it is moving up the curve (see figure 24). In developed countries, the ratio of bulk cement is
typically more than 70 percent, and other emerging economies also have much higher ratios
than India, including Brazil, Indonesia, and China, all of which are above 35 percent.
Infrastructure and logistics constraints have limited the rise of RMC and bulk cement in India,
due to road infrastructure challenges and the need for bulk terminals and bulk handling
capabilities, both with the cement companies and the end users (see sidebar: Need for
Change in RMC Supply Landscape).
The bulk terminals will need to be built as close to the grinding units as possible to optimize
logistics costs. Alternatively, the industry will need to invest in special purpose vehicles for
managing bulk logistics wherever bulk delivery terminals are not close to grinding units.
Cement companies would need to invest and significantly improve bulk handling capabilities
in order to cater to the increased bulk demand in the future. Investment will be required in
creating an adequate number of warehouses with suficient space and equipped with the
technology that can automate the loading-unloading processes.
Need for Change in RMC Supply Landscape
Large buyers procuring RMC
need consistency in quality
and delivery, and the supply
landscape will have to evolve if the
market is to meet this demand.
The RMC supply market currently
has few large, organized players
and is dominated by small, local
players that are unable to meet the
quality and delivery requirements
of large buyers. To meet the
expected RMC demand in 2025,
large and technically strong RMC
players will need to emerge amid
expanded capacity. Government
will also need to regulate the
aggregates market and the
smaller RMC players in order to
provide a level playing field to all
and allow large, organized players
to operate profitably and improve
the RMC supply landscape.
,CCC C ,CCC 1C,CCC 1,CCC 2C,CCC 2,CCC C,CCC ,CCC AC,CCC A,CCC C,CCC
Bulk ratio
GDP per capita ()
Chiha
Lebahoh
New Zealahd
Mexico
Ronahia
Bulgaria
Slovakia
Czech Republic
South Africa
Chile
.S. Gernahy
Sihgapore
Austria
Spaih Cahada
taly
Australia
Huhgary
Croatia
Vehezuela
Thailahd
Malaysia
Brazil
Serbia
India
India
C.C
C.1
C.2
C.
C.A
C.
C.6
C.7
C.8
C.
1.C
Emerging economies
Developed economies
hdohesia
Viethan
Philippihes
Sources: CA World Factbook; A.T. Kearhey ahalysis
Figure 2A
Demand for bulk cement is expected to rise
Creating the capacity for future growth amid challenges
The projected growth in cement production will require considerable new capacity and a sharp
rise in resource requirements, which will pose several challenges for the industry.
Large investments are needed to meet the growing demand
Cement demand in 2025 is estimated to be between 550 and 600 MTPA, which means India will
need 330 to 380 MTPA more capacity for cement and 240 to 270 MTPA more capacity for clinker
by 2025. Over the past six years, however, India has added almost 100 percent capacity ahead
of demand, resulting in underuse, so the present need to increase capacity will be low (around
20 percent, or 65 million tonnes) over the next four to five years. However, after that, overall
capacity will need to almost double to 650 to 700 MTPA by 2025 (see figure 25).
Notes: Pro|ected capacity was calculated assunihg capacity utilizatioh of 8 perceht. hvestneht required estinated at curreht prices.
Figure 2
Cement capacity will need to almost double by
2C2 2C22
2C2e
2C18
2C21e
2C1
2C17e
2C12
2A
Ceneht capacity (nillioh tohhes per year)

Capital ihvestneht (rupees CCC crore)
6
11C
1C
1C
18C
Two factors can enable Indias ability to add capacity in the near future:
Consistently healthy returns on investments in the industry. The ability to generate suitable
returns from current investments is an important factor in making investment decisions about
additional capacity. Reasonable returns will also make the cement industry attractive from the
standpoint of foreign investments. The industry needs to optimize costs continually to ensure
healthy EBITDA levels. Since cement is one of the highest-taxed commodities, government
incentives in the form of tax relief by providing infrastructure status to the cement industry
or amendments to the tax structure (to bring it closer to other commodities) will help contain
cement prices.
Simplifying regulations for greenfield capacity setup. The government needs to take steps
to streamline the process of setting up a new plant. For instance, land acquisition is currently
a complex process. Often, land records with state authorities are inaccurate or incomplete,
leading to delays and disputes over ownership and land plot size. Updating and computerizing
land records supported through land surveys is essential, as the process of land acquisition has
become a major bottleneck in setting up a new plant. Environmental and forest clearances are
other examples of processes that would benefit from streamlining.
Capacity expansion will lead to an increase in resource requirements
Requirements for many areas are increasing as capacity expands. Following is a look at some of
the most important changes in requirements.
Raw material requirements. The primary raw materials used to produce the major types of
cement are limestone, gypsum, and fly ash. Over the next 12 years, while fly ash will be plentiful,
the availability of domestic gypsum could present a challenge at a national level, while there
may be a shortfall in limestone in specific regions (see figure 26).

Includes inferred and reconnaissance resources as of January

Rajasthan and Gujarat reserves only; reserves in other states unusable due to thinly spread deposits and territorial deposits
Sources: th Five Year Plan report on cement, Indian Minerals Yearbook (Indian Bureau of Mines); A.T. Kearney analysis
Figure
lndias domestio supply of limestone and gypsum oould oome up short
Cement-grade limestone availability
(n||||cn tcnnes)
Gypsum produotion
z
(n||||cn tcnnes)
Current
total
resources
Unusable
resources
Usable
by cement
industry
Expected
requirement
-,ooo
-po,ooo
1zo,ooo-
1o,ooo
nferreo
rescurces
`
Reserves
ano cther
rescurces
2CC
2CA
Current
usable
reserves
Demand from
competing
applications
Usable by
cement
industry
Expected
requirement
1o-1o
2C2C
-zo
-1z
Following is a look at each of these important raw materials.
Limestone. The cement industry will need roughly 5.5 billion tonnes of limestone by 2025.
According to the Indian Bureau of Mines, total cement-grade limestone resources equal
roughly 125 billion tons, of which about 90 billion tonnes can be used. These resources are
expected to last for another 55 to 60 years given the expected growth in cement production
and technological advances that might reduce the limestone consumption per tonne of
cement produced. That said, there will be specific regions where limestone availability will
become a crucial bottleneck much earlier. In addition, the extraction of limestone from the
already insuficient resources is being hindered by the increasing administrative delays in the
procurement of prospecting licenses and mining leases.
Gypsum. Industry demand for gypsum is expected to reach 250 million tonnes cumulatively by
2025. The usable reserves of gypsum in India currently amount to 140 to 150 million tonnes, of
which about 125 million tonnes are available to the industry. This domestic supply will be enough
to support the industry for the next seven to eight years, beyond which the sector will need to
rely on imports. However, because gypsum production across the world is abundant, importing
gypsum is not expected to be a challenge. In addition, a few alternatives may arise, including
using synthetic gypsum or exploring deep-seated mining in search of additional reserves.
Fly ash. The cement industry can absorb much of the fly ash generated by other sectors in
an ecologically beneficial manner. In 2025, demand will reach 100 MTPA, with the cumulative
amount of fly ash consumed in that time reaching 870 million tonnes. Currently, only about
56 percent of the fly ash produced in India is used, with the cement industry accounting for
almost 27 percent of the total production. Continued low usage and expected power industry
growth, which will produce 650 million tonnes of fly ash in 2025, ensures that the cement
industrys fly ash requirements are met through 2025.
One sticking point is a lack of transparency in the way fly ash is priced, which derives from the
lack of a consistent price-determination mechanism. As a result, procuring fly ash has become an
additional cost for the cement industry. It is essential that information about fly-ash generation,
usage, and stock be made public by the Ministry of Environment and Forests and the Central
Electricity Authority and that every power plant regularly displays complete information about
plant-level ash generation, stock, disposal, and pricing.
Energy and coal requirements. Cement manufacturing uses energy in the calcination process
(thermal) and for power generation. We expect power requirements and those for thermal
energy in the clinker manufacturing process to improve by 6 to 8 percent over the next decade.
Also, coals dominance as a primary energy source along with the use of captive power plants
will continue. The average coal requirement of cement will be 130 kilograms per tonne by 2025,
which equals an overall coal requirement of 70 to 75 MTPA by 2025. Of this, 74 percent will be
used for thermal processes and 26 percent for power generation (see figure 27).
Note: WHR is waste heat recovery. AFR is alterhative fuels ahd raw naterials.
Sources: 12th Five Year Plah report oh ceneht, Plahhihg Connissioh, Cehtral Electricity Authority, press articles, Coal hdia, Mihistry of Coal;
A.T. Kearhey ahalysis
Figure 27
Energy seourity will beoome a oonoern, and proaotive usage of ooal alternatives
will be oruoial
Projeoted energy demand
( trillion cal)
lndioative souroe mix for meeting future energy
demands, zoz
2C12 2C2 Total ehergy
requireneht
Donestic
coal
Donestic
petcoke
nported coal
ahd petcoke
WHR ahd
AFR
1oo% 1/
%
Power
Thermal
7A%
26%
1S/
7%
27%
/.%
Alterhate sources
of donestic coal
?
Most
ecohonical
source
This annual requirement of 70 to 75 million tonnes of coal will be a challenge for the cement
industry. For one, the industry has low priority among other essential sectors in acquiring linkages.
Secondly, the domestic coal deficit is estimated to be about 540 MTPA by 2025, which could
increase reliance on imports and open market transactions to meet requirements.
The industry and the government can manage such a scenario efectively by taking the
following actions:
Seek control of overseas coal assets, perhaps through tie-ups or acquisitions in emerging
economies (for example, Mozambique, Indonesia, and South Africa).
Adopt processes such as waste heat recovery, and use alternative fuels to substitute for coal.
Reduce delays in signing fuel supply agreements between cement and coal companies.
Seek other non-conventional sources of energy, such as AFRs for calcination and renewable
sources for power generation.
Logistics. By 2025, the cement industry will need additional transportation for nearly 900 MTPA
of raw materials and finished products.
The industry will face several challenges in an already dificult environment. In rail transportation,
the industry will need as much as 4,500 additional rakes by 2025. The current bottlenecks will
worsen if active measures are not taken to improve infrastructure capacity and quality. The
government must increase the supply of rakes and modernize the sidings and terminals to
support any increase in transportation requirements. The government also needs to encourage
the industry to make investments in owning assets by launching economically viable schemes
such as own your wagon. In addition, the industry needs to strengthen its agreements with the
railways to ensure a commitment to rake supply.
In road transportation, an additional three to four lakh heavy trucks will be required to
meet industry road transportation needs in 2025. Building more roads and improving the
quality of existing roads will be needed to meet this demand. From a policy perspective, the
government needs to consider amendments to the Motor Vehicles Act to increase the
maximum loading capacity of trucks. As modern multi-axle trucks have greater load-bearing
strength, the maximum allowable load limit could be increased from the current nine tonnes
per axle to 13.
Manpower. To keep pace with modernization and to spur industry expansion, the cement
industry needs a large pool of skilled manpower. A modern cement plant with one MTPA
capacity needs roughly 400 workers, including 150 at the manager and supervisor levels.
Overall, 66,000 additional technical people, including 23,000 engineers and supervisors,
and 50,000 unskilled workers, will be needed to meet the targeted production levels.
12
The industry will continue focusing on increasing mechanization and improving labor
productivity. There could also be some reduction in manpower costs through promoting
leaner organizations, reducing hierarchy by providing cross-functional skills to employees,
and developing technologies to automate some processes. A prospective area for
automation could be in loading-unloading (especially in rail loadings) and implementing
palletization that could also improve eficiency. Despite the implementation of such
measures, a shortage of skilled workers is expected to emerge. In particular, two major
manpower-related challenges will afect the industry:
12
Indian Cement Review, July 2013
Education and training. Vocational training programs are being ofered through about 8,000
Industrial Training Institutes (ITIs) and Industrial Training Centers (ITCs), but this is not sufi-
cient to meet industry requirements. (By comparison, China ofers close to 500,000 training
institutes.) Furthermore, training programs must be upgraded to align with the latest industry
requirements. The government will have to increase the training infrastructure and the intake
capacity. Industry and educational institutions can also join forces to build programs in which
working managers can teach the students and improve their employability. Additionally,
the industry can contribute to enhancing the overall education infrastructure by providing
skill-based training to the local communities as part of its corporate social responsibility
(CSR) agenda. Also, a conscious efort to increase gender diversity in both managerial and
technical roles will increase the available talent pool size for the industry.
Competition with other industries for leading talent. The cement industry is competing with
other industries for both skilled and unskilled employees, so it needs to ofer a more attractive
value proposition to attract and retain the best talent.
The service sector is succeeding against the manufacturing sector in attracting both new
engineering and management talent, thanks to its more attractive remuneration, lucrative
growth prospects, and better working conditions. Additionally, cement manufacturing plants
remote locations compared to other manufacturing industries, such as automotive, gives it a
disadvantage. Hence, significant eforts need to be made toward talent retention and
leadership management going ahead. This can be achieved through comprehensive
onboarding programs that have a good mix of classroom and practical training, providing
cross-functional skills to employees on the job and aligning reward and compensation
vis--vis other manufacturing industries.
To attract and retain unskilled workers, the industry needs better working conditions, improved
remuneration, and enhanced training programs. Additionally, hiring and managing a large
number of contract workers is expected to be a challenge as contract laborers are not part of
the labor union and are easily influenced by unscrupulous elements, resulting in frequent
incidents of unrest at cement plants.
A greener and more eficient cement industry
Rising cement production will lead to a corresponding increase in energy demand and emissions.
Ongoing improvements in process eficiencies and clinker use will help, but will likely bring only
marginal improvements in emissions and energy use.
Roughly 40 percent of emissions from cement plants come from fuel burned in the calcination
process and electric power consumed at various stages of the manufacturing process. The
remaining amount comes from the stoichiometric process of clinker formation. Unless there is
a major technological innovation, only incremental improvement is likely in this part of the
cement-making process.
Investments and additional policy initiatives from the government will be needed to aggres-
sively reduce greenhouse emissions.
Continuing ongoing improvement eforts
Roughly two-thirds of the current cement capacity was added in the past 10 to 15 years, so most
cement plants in India are already state-of-the-art. The industry is expected to further improve its
energy eficiency by retrofitting old plants with new, energy-eficient equipment and by bringing
in process improvements. These upgrades will reduce CO
2
emissions per tonne of cement by
about 11 percent, or 40 to 45 MTPA of CO
2
at 2025 production levels (see figure 28).
Sources: World Business Council for Sustainable Development, Confederation of Indian Industry; A.T. Kearney analysis
Figure
Several aotions oould reduoe CO
z
emissions from the oement industry
Savings in CO
z
by zoz
(million tonnes per year)
Ongoing actions
Reduction
of clinker
factor
Rise in
thermal
efficiency
Rise in
power
efficiency
Expeoted
minimum
savings
Thermal
substitution
Waste
heat
recovery
Renewable
energy
Total
savings
Underused actions
Sz/o
Technological improvements. The industrys average thermal energy consumed per kilogram of
clinker is expected to improve by 4 to 6 percent over the next decade, and the power consumed
per kilogram of cement will improve by 7 to 8 percent. This would equal 35 kilograms less CO
2

emitted per tonne of cement, or total savings of 20 to 22 MTPA of emissions by 2025. Some of
the current and potential technologies that can help in reducing emissions include:
High-eficiency clinker coolers. Improvements in cooler technology to achieve better air
distribution and reduce the need for cooling air, along with improvements in recuperation
eficiency, will reduce heat loss in coolers and increase overall energy eficiency.
The grinding stage. Introducing an external recirculation system for materials and modifying
the mill body to improve air and material trajectories could improve the energy eficiency of
the grinding stage.
Multichannel burners. Retrofitting uniflow burners with multichannel burners to aford
better flame control, fuel flexibility (especially AFRs), and reduced NO
x
emissions would
help reduce emissions.
Process fans and auxiliary equipment. Variable frequency drives and more eficient axial
fans, rather than centrifugal fans, would improve power eficiency.
Reducing the clinker factor. As the most energy-intensive process in the cement value chain,
clinker manufacturing contributes the highest CO
2
emissions. Reducing the proportion of clinker
by adding fly ash, slag, or other blending materials is an important factor in reducing emissions.
The cement industry can further reduce the usage of clinker per tonne of cement from 0.73 to 0.67.
There are several ways to do this:
Increase blending in PPC. The average fly ash content in PPC made in India is 27 percent, well
inside the range permitted by the Bureau of Indian Standards (BIS), which is 15 to 35 percent.
European norms allow for up to 55 percent fly ash.
Boost blending in PSC. The average slag content in PSC in India is 40 percent, while the BIS
allows 25 to 70 percent. By working in tandem with the steel industry to ensure granulation of
blast furnace slag, the cement industry can decrease the clinker factor in PSC and help clear
slag which would otherwise pose environmental concerns.
Use low-grade limestone. Portland limestone cement (PLC) is a blended cement made by
adding substances such as low-grade limestone or dolomitic limestone to clinker during
grinding. Popular in Europe and the United States, it has not been made in India due to the
absence of specifications.
Use alternative blending materials. Many hazardous materials, such as copper slag, lead-zinc
slag, and other materials generated from non-ferrous industries, could be ground with clinker to
produce blended cement. Global cement companies such as Holcim and Mitsubishi use copper
slag as a blending material to make concrete in Singapore and Japan. Currently, however, these
materials are not approved by BIS for use during cement manufacturing.
Capitalizing on underused measures for further emission savings
In addition to the expected savings resulting from ongoing improvements, the cement industry
could reduce CO
2
by 24 MPTA by 2025 by aggressively pursuing changes such as thermal
substitution, waste heat recovery, and renewable energy sources. These measures may also
reduce the use of coal.
Thermal substitution and AFRs. Beyond cutting the dependence on coal, alternative fuels
and raw materials are a way to generate thermal energy and reduce CO
2
emissions. The
industry can save up to 10 MTPA of CO
2
by 2025 by raising the thermal substitution rate (TSR)
from its current value of less than 1 percent to 12 percent by 2025. (By comparison, the global
average is 30 percent TSR.)
Cement kilns are ideal for waste disposal because of their high temperatures, oxidizing
atmospheres, long residence times, and the retention of ash in clinker. Theoretically, cement kilns
can operate entirely on AFRs without relying on primary fossil fuels. This is a unique opportunity
for the cement industry to become a conduit for efective disposal of hazardous materials and
otherwise polluting wastes. Using waste material in such a manner also cuts back on the need to
find a way to dispose of waste, and it helps address any environmental damage that may have
resulted from improper disposal.
Presently, TSR values in India are low because of the structural challenges related to its adoption
and implementation. Some ways to tackle these constraints include the following:
Enact waste management legislation to support co-processing. Legislation is needed
to support the co-processing of waste as an alternative to landfills and incineration (on the
lines of Europes landfill and incineration directives). From a pricing point of view, these
wastes must be available to the cement industry at near-zero or negative costs on the basis
of the polluter pays principle. Streamlining the interstate transportation of hazardous
wastes from their sources to cement plants and supporting it with legal frameworks can
avoid supply constraints.
Build waste handling infrastructure. To ensure the availability and consistency of AFR
quantity and quality, a third-party industry sector or a government body could work as
an intermediary between the generators of waste and the cement plants. This has been
implemented in other countries in the form of public-private partnerships (see sidebar:
Integrated Waste Management: Costa Rica). Tracing these wastes is required to avoid
undesired emissions and to ensure AFR quality.
Increase the level of social acceptance. Social concern regarding the hazards of
co-processing should be addressed through systematic communication with both the
public and with regulatory agencies, with a focus on the advantages of co-processing and
compliance with safety and environmental norms.
Waste heat recovery. Adoption of WHR systems in Indian cement manufacturing facilities has
been relatively slow, with only 12 of about 180 large cement plants in India adopting this
technology. Only about 150 MW of WHR systems are in place out of the total potential of 550
MW. The waste heat from gases that come from the preheater and cooler of dry-process plants
can be used to produce up to 15 percent of the plants power requirementsa key to reducing
emissions in the future.
Barring minor challenges in heat extraction from high-moisture-content raw material, WHR
systems are technologically proven and stable alternatives. However, they require a high capital
investment to set up. Layout constraints and the lack of uniform policies regarding the renewable
status of WHR among diferent states further hamper this technology. To place the initial
investment hurdle in perspective, setting up a WHR plant is about 140 percent more expensive
than setting up a captive power plant of the same capacity.
Faster adoption of WHR systems in cement plants in India can come with adequate policy and
financial incentives provided by the government. Granting renewable status to WHR uniformly
across the country and providing attractive financing options for setting up these systems can
spur this technology forward. With the right set of incentives, the cement industry has the
potential to abate up to nine MTPA of CO
2
emissions by 2025.
Renewable energy sources. Roughly 60 percent of the industrys power requirement comes from
captive power plants, which today has a relatively low adoption rate of renewable energy. This is
Integrated Waste Management: Costa Rica
In 2004, Holcim Costa Rica S.A.
set up a state-of-the-art cement
kiln capable of co-processing
waste material. In this situation,
the domestic infrastructure was
suitable for municipal waste
disposal but not hazardous
wastes, which were disposed of
in landfills. Also, no legislative
framework existed for the
permission and regulation of
co-processing before then.
Implementation. An integrated
waste management system was
designed to obtain waste from the
public sector (municipal waste)
and from industries (hazardous
industrial waste). Some waste
categories were collected
through NGOs with the help of
the public sector. Wherever
possible, the plant ensured
waste was collected directly
from the generating industries
to provide good traceability.
Key reasons for success. Holcim
Costa Rica S.A. worked in
conjunction with other cement
manufacturers and the health
ministry to develop regulations
that permitted co-processing
certain waste materials. This was
backed by rigorous testing and by
demonstrating an environmen-
tally sound waste management
system. Also, with active commu-
nication policies and promotion
activities for co-processing, the
industry was able to change the
perception of co-processing from
harmful incineration to an
important method for safe and
efective waste disposal.
Figure
Vision for the Indian cement industry
Vision
Support the
building of
modern India
Secure a cost-efective
supply of future energy
needs while becoming
a world leader in
sustainability
Become one of
the most admired
industries among
the core sectors
in spite of India ranking among the top five countries globally in terms of installed renewable
energy capacity. By using renewable energy sources to ofset 10 percent of the electrical power
requirement by 2025, the industry can reduce CO
2
emissions by more than five MTPA.
Vision 2025
A promising future for Indias cement industry
The cement industry has undergone a remarkable growth trajectory over the past couple of
decades, and is expected to transform itself again over the next decade. Production is likely to
increase by more than 2.5 times, requiring significant investments in capacity and capability.
Moreover, changes in end-usage segments will require several adaptations to cement companies
operating and business models. With adequate government support and proactive industry
measures, the industry has the potential to play an instrumental role in building a modern India
and could become globally admired for best-in-class eficiency, technology, and processes.
Keeping these possibilities in mindalong with the challenges that need to be overcome along
the waya long-term vision, built on three pillars, can be considered (see figure 29).
Support the building of modern India. Infrastructure and housing will be essential building
blocks for modern India, and high-quality cement and concrete at cost-efective prices will be
prerequisites for both sectors, requiring the industry to build adequate supply capacity to meet
the demand. To ensure the viability of added capacity, continuous eforts to improve cost
eficiencies will be crucial. In addition, advancements in product oferings (value-added
products), the distribution model (bulk delivery), and structural design and specifications can
help promote best-in-class construction practices. The industry can be a role model for other
process and manufacturing industries by developing best practices while using state-of-the-art
technology for cement production and its application.
Secure long-term energy requirements in a cost-efective, sustainable manner, and emerge
as a world leader in sustainability. The projected long-term growth in cement production will
result in a corresponding increase in thermal and electrical energy requirements for the sector.
The supply of coal, the preferred source for thermal and electrical energy, is already bottle-
necked. In addition, the impact of eficiency improvements is slowly plateauing. It will be to the
industrys advantage to work creatively to further improve energy eficiency, while increasing
adoption of alternative sources of energy. Investments in building strong local R&D capabilities
will be needed to keep up withif not ahead ofglobal advancements in technology while
using the industrys increasing scale to push eficiency to the next level.
Become one of the most admired industries among core sectors. The cement industry has
directly contributed to the nation with taxes and jobs. Indirectly, it has contributed by developing
communities in several remote areas, acting as a sustainable outlet for hazardous waste material,
and taking big strides to improve safety standards for its workers. The industry will benefit by
becoming more appealing to employees and to communities. A continued focus on the well-
being of other key stakeholdersby becoming an end-to-end solution provider for customers
and ofering good long-term returns for shareholderswill also need to be maintained.
These pillars of the vision for 2025 will be founded on seven objectives (see figure 30). Success
will depend on efective collaboration between industry and government.
Figure
Goals of Vision
Ensure viability of new capacity addition
De-bottleneck input resources to enable growth
Promote global best practices in use and delivery of cement
Objectives Vision
Support the building of
modern India
Ensure strong focus on employee welfare and retention Become one of the most
admired industries among
the core sector
Reduce energy requirements
Increase adoption of cleaner sources of energy
De-bottleneck supply of domestic coal while maximizing use of petcoke
Secure a cost-effective supply
of future energy needs while
becoming a world leader in
sustainability
Imperatives for Vision 2025
Industry imperatives
Achieving the vision for 2025 will require the industry to take on seven objectives:
Objective 1: Ensure viability of new capacity addition
To meet the nations demand in 2025, the industry will need to set up new capacity of 350 MTPA.
This will require significant capital flow to the sector, and returns will be an essential prerequisite.
The industry will need to work on the following areas:
Improve operating cost structure. Increase industry eficiency by developing innovative
manufacturing processes and technology and bringing down operating costs. Some ways in
which this could be done include the following:
Reevaluate asset footprint. Take an all-encompassing view while designing the asset
footprint and comprehensively consider emerging dynamics in logistics, production
eficiency (both clinkerization and grinding), manpower availability, and state-level taxes.
Step up automation in loading and unloading activities. Loading, especially on rail, is
labor intensive. The industry can capture sizable savings by automating this process. Adopt
palletization in truck loading to improve eficiency while also reducing manpower costs.
Improve power eficiency. Continue to make eforts to improve overall power eficiency by
adopting more eficient electrical equipment, including motors, compressors, auxiliary fans,
and lighting. (More details are discussed in Objective 4.)
Increase thermal eficiency. Consider adopting integrated systems, which are focused toward
recovering all sources of waste energy and heat in the system and using it for diferent applica-
tions. Such systems are optimally designed to minimize energy use in the overall system, thus
maximizing energy eficiency of the system. (More details are discussed in Objective 4.)
Strive for leaner organizations. Use automation and increase multi-skilling to promote
leaner organizations, thus giving employees cross-functional expertise. Strive to optimize
outsourcing levels based on strategic importance of key processes.
Maximize the use of blending material and the share of blended cement. Improve cost
eficiency by increasing the use of fly ash and selling more blended cement by ofering
institutional buyers a strong integrated proposition.
Create awareness about the benefits of blended cement that is made in a controlled environ-
ment with good-quality ash in adherence with the BIS, resulting in a more reliable final product.
Develop and promote the use of performance-based blended cement, which is customized for
specific customer applications and requirements. Invest in R&D to support the development of
such performance-focused cement.
Promote the adoption of 56-day concrete strength as a design parameter instead of 28 days
for applications where 28-day strength is not relevant. This would help increase the adoption
of blended cement, as 56-day strength blended cement is on a par with OPC.
Ensure better collaboration between cement companies and end users to enable optimal
usage of cement, with the right grade of cement used for each application. For example,
low-strength cement would sufice for plastering.
Strive for blended cement to be included in project specifications. During the early stages,
work closely with influencers such as the NHAI for highway projects, PWDs for urban roads
and flyover projects, the Ministry of Water Resources for irrigation canals, and railways for all
rail projects to ensure that blended cement is included in the project specifications.
Objective 2: De-bottleneck input resources to enable growth
Proactively address logistical bottlenecks. Work with the government to address
logistical challenges:
Collaborate closely with the railways. Provide visibility on rake requirements to increase
availability of rakes and ensure productive usage.
Invest in supporting infrastructure. Purchase private rakes and special-purpose wagons.
Optimally design the manufacturing asset footprint to optimize the overall logistics and
production cost.
Increase the use of inland waterways as an alternative to rail and road wherever feasible.
Secure the long-term supply of key input raw materials (limestone and gypsum). The
current proven limestone reserves might only meet the demand of the next 25 to 30 years.
The government has identified other lower-probability resources, but exploration and mining
will need to intensify. Similarly, the availability of gypsum from domestic sources will become
a challenge in 2020 and beyond. Three moves can alleviate the problem:
Develop capabilities for deep mining to access additional limestone resources.
Work on improving the cost efectiveness of using lower-grade limestone along with
sweeteners.
Acquire global assets of gypsum for secured long-term supply, explore deep mining of
gypsum, and increase use of synthetic gypsum.
Drive availability of skilled resources. Take proactive steps to increase the supply of skilled
labor by setting up dedicated cement training institutes. This can be achieved with the adoption
of ITIs through public-private partnerships with the government and by setting up private
training centers. Contribute to the improvement of the countrys overall education infrastructure
by providing skill-based training to the local community as part of the CSR agenda.
Objective 3: Promote global best practices in use and delivery of cement
Ramp up the productive use of cement. Increasing the use of cement in underpenetrated
applications can generate much higher demand. Two crucial applications are concrete roads
and cement-lined canals. Three moves are essential:
Adopt a tailored approach for a variety of concrete roads. For rural roads, promote
customized products such as cell-filled concrete pavement. For urban roads, endorse
new solutions such as white topping (laying a concrete layer on top of existing asphalt
and bituminous roads) as a low upfront investment that increases the life of the road and
reduces maintenance costs. For state and national highways, increase awareness among
stakeholders about the benefits of concrete roads.
Train engineers and skilled laborers. Because of the low penetration of concrete roads,
engineers, supervisors, and masons working for authorities such as the Central Public Works
Department, PWDs, and NHAI do not have the necessary construction knowledge. Invest in
building these capabilities by organizing required training programs.
Pursue the building of concrete irrigation canals. As is true for roads, using cement for
canals has many benefits. Maintenance costs are much lower than for conventional canals,
the life span is longer, and the amount of water conserved is significantly higher. Pursue this
agenda, and roll out campaigns to increase the awareness of the benefits of using cement in
canal linings. Persuade the relevant authorities to comprehensively evaluate the benefits of
cement-lined canals over the entire life cycle.
Introduce and ofer new value-added or application-oriented products. Increase the indus-
trys ability to serve institutional cement buyers and retail clients. A key diferentiator for
cement companies will be ofering customized and value-added products:
Provide technical solutions and customized products.
Change standard credit and commercial terms to serve institutional customers more efectively.
Develop account management skills, and improve responsiveness on all customer feedback,
inquiry, and complaints.
Improve supply-chain capabilities to ensure consistent and on-time delivery at the
customer site.
Build relationships with key influencers such as architects and designers, and involve them in
the early stages of product and solution design.
Build suficient bulk-handling infrastructure. Gear up to manage the required increase in
bulk-handling capabilities:
Develop bulk terminals as close to grinding units as possible to optimize on logistics.
Alternatively, invest in special-purpose vehicles to facilitate bulk delivery where terminals are
not close to grinding units.
Build adequate warehouses, upgrade the quality and infrastructure of warehouses, and build
technologies that can automate loading and unloading processes.
Objective 4: Reduce energy requirements
Reduce specific energy requirements per tonne of cement by 10 to 12 percent.
Improve the energy eficiency of clinker and cement manufacturing.
Technological improvements to bring in eficiencies. Pursue technological improvements,
aiming for a 5 to 8 percent gain in energy eficiency over the next decade. Changes will include
using the latest high-eficiency clinker coolers, improving the eficiency of the grinding stage,
using multichannel burners, and improving process fans and auxiliary equipment. Another
move that will help is phasing out ineficient equipment. Retrofit with the latest technology in
older plants wherever viable. A proactive model such as the Chinese model of replacing old
machinery with new should be followed to have the most environmentally friendly and eficient
manufacturing plants.
Reduce clinker factor by 7 to 8 percent. Reduce the use of clinker per tonne of cement from its
current value of 0.73 to 0.67 by adopting the following measures:
Increase blending of fly ash in PPC from the current average of 27 percent.
Increase blending of slag in PSC from the current average of 40 percent.
Use low-grade limestone (PLC).
Use alternative blending materials such as copper slag, lead-zinc slag, and other materials
generated from non-ferrous industries.
Objective 5: Increase adoption of cleaner sources of energy
Reduce energy use by 12 to 15 percent.
Reduce energy use by using cleaner sources. Prepare for greater use of alternative fuels
and raw materials, and aim for 12 percent of thermal energy to come from alternative fuels.
Adopt cleaner processing techniques. Continue to improve on reducing both thermal and
fuel NO
x
emissions from cement kilns. Minimize the oil-equivalent consumption of the overall
cement manufacturing process to realize PAT (Perform, Achieve, Trade) targets.
Work with other stakeholders. Develop the requisite infrastructure in cooperation with
waste-producing industries and non-governmental organizations. Improve the viability of
WHR technology through innovation to increase the adoption rate. Use more renewable
sources to generate power, aiming for up to 10 percent of electrical power coming from
renewable sources.
Objective 6: De-bottleneck supply of domestic coal while maximizing use of petcoke
Use domestic coal and petcoke to fulfill at least 50 percent of energy needs. Push the agenda
with the government to gain access to captive coal mines while forging strategic tie-ups
for a fair share of the supply. The supply of domestic petcoke is expected to increase to more
than 22 MTPA by 2025. Industry will need to maximize its use through efective tie-ups
with suppliers.
Objective 7: Ensure strong focus on employee welfare and retention
The industry has been facing stif competition from other sectors for hiring and keeping talent.
Retain employees and develop leaders using an all-encompassing approach.
Design a robust and comprehensive onboarding process with a good mix of practical training
and classroom sessions to give employees the right skills early in their career.
Align rewards and compensation to be competitive with other manufacturing industries and
service sectors.
Ofer faster career progression and a rich on-the-job learning experience.
Government imperatives
In addition to playing a direct role in generating demand for cement by stimulating infrastructure
creation, the government also has a supporting role to play by helping the industry achieve each
of the seven objectives.
Objective 1: Enable viability of new capacity addition by helping the industry become more
cost-competitive
Rationalize the tax structure for cement and other input materials. Doing so will help make
the industry more cost-competitive. Two moves are essential:
Streamline excise duty and VAT on the input materials by giving the cement industry
infrastructure status.
Reduce the import duties on coal and gypsum, given shortages.
Fast-track the implementation of the Goods and Services Tax (GST). Keeping taxes and
incentives uniform across geographies ensures a level playing field.
Objective 2: Help the industry de-bottleneck input resources to enable growth
Streamline land acquisition process for greenfield expansion. Reduce minimum no-objection
requirements to ensure smooth approval.
Improve the quality and availability of logistics infrastructure.
Strengthen the railway infrastructure in key cement-producing and consuming belts. Ensure
wagon availability by increasing the supply of wagons and modernizing the railway sidings,
taking industry requirements into account.
Establish faster linkage of new plants and mines to state and national highways to facilitate
speedier movement of materials and product.
Develop infrastructure for inland and coastal waterways to be functional throughout the year
with adequate loading and unloading terminals.
Ensure that incentives for logistic assets ownership schemes such as own your wagon are
commercially viable for industry.
Ease the supply of limestone and gypsum.
Fast-track the allocation of new limestone mining licenses and renewal of existing licenses
by streamlining the administrative procedures.
Use incentives to promote the use of low-grade or marginal-grade limestone.
Objective 3: Promote global best practices in use and delivery of cement
Revisit the specifications for infrastructure projects. Evaluate the use of cement or concrete
in roads and canals from a life-cycle cost perspective, and encourage adoption.
Allow infrastructure projects to use blended cement. Agencies such as NHAI, PWDs, the Ministry
of Water Resources, and railways should allow blended cement for large infrastructure projects.
Ensure aggregates and local RMC players adhere to existing regulations and norms to provide
a level playing field and support the entry of organized players in the RMC business.
Reexamine the Bureau of Indian Standards cement guidelines. Consider migrating to
standards that are based on product performance rather than product composition. This will
encourage innovation in product composition to develop more eficient and environment-
friendly products without compromising performance.
Objective 4: Support the industrys eforts to reduce energy requirements
Support fair pricing of fly ash. Provide adequate transparency to ensure that the pricing of fly
ash is fair. Information about fly-ash generation, use, and stock should be made public by the
Ministry of Environment and Forests and the Central Electricity Authority. It should also be
mandatory for each power plant to display complete information about the plant-level ash
generation, its stock, disposal, and pricing on a regular basis.
Objective 5: Support the industrys eforts in increasing adoption of cleaner sources of energy
Encourage and facilitate greater use of alternative fuels, including WHR, alternative fuels
and raw materials, and renewables.
Develop transparent waste management legislation at a local level to restrict land-filling or
dedicated incineration, and allow controlled waste collection and treatment.
Support adequate local waste collection networks for systematic collection, segregation, and
handling of industrial and municipal wastes through adequate incentives.
Create a level playing field for waste management with a uniform implementation of a
polluter pays principle. Ensure that wastes are made available to the cement industry at
near-zero or negative costs.
Ofer incentives for adopting WHR systems until financial viability is established. Develop
regulatory frameworks that support greater financial viability of WHR power generation,
including providing WHR with renewable energy status and providing associated incentives.
Promote new emission-reducing technologies. For new and alternative technologies, such
as nanotechnology and geopolymer cement, ensure that sustained funding and support
mechanisms are in place to support their development and deployment to cut CO
2
emissions.
Objective 6: De-bottleneck the supply of domestic coal while maximizing use of petcoke
Ensure a level playing field for cement companies to participate in the auction of coal blocks.
Also, allocating good-quality linkage coal to the industry would enable the use of low-grade
limestone and increased consumption of fly ash.
Build adequate infrastructure to facilitate better handling of coal, especially at importing ports.
Objective 7: Aid the industrys eforts toward employee welfare and retention
Improve the quality and number of ITIs.
Pick up the pace for setting up new institutes, and improve the quality of the training
infrastructure to make it relevant in an increasingly mechanized manufacturing world.
Strengthen the public-private partnerships model for ITIs by giving the industry more
autonomy to run the organizations and teach students the desired skill sets which are specific
to the cement sector.
This study was undertaken by A.T. Kearney with support from the Confederation of Indian Industry. We would also
like to thank the industry executives, institutions, and government bodies for their contributions to the study.
We would like to acknowledge the contribution of Akash Jain, Arun Chandran V, and Anuj Shah, consultants
with A.T. Kearney India, in the analysis and compilation of this report.
Authors
Manish Mathur, partner, Gurgaon
manish.mathur@atkearney.com
Siddharth Jain, consultant, Mumbai
siddharth.jain@atkearney.com
Arun Unni, principal, Mumbai
arun.unni@atkearney.com
Appendix
GDP at purchasing power parity for relevant countries
Country
China
Brazil
Indonesia
United States
Italy
China
Korea
Turkey
Italy
Iran
Mexico
Japan
Malaysia
Indonesia
Colombia
Chile
Brazil
China
South Korea
Germany
Italy
Japan
France
Turkey
Iran
Malaysia
Mexico
Chile
Brazil
Colombia
Russia
South Africa
Argentina
Year
2C12
2C12
2C12
2C12
2C12
2CC
18A
1C
1
182
181
16
188
2CC
1C
18
18
2CC
18
16
17
17A
171
17
2CC1
1A
17
1
2CC2
2CC
2CCC
2CC2
12
Per capita GDP (purchasing power parity) in
,21C
11,72C
A,81C
1,7CC
2,28C
A,11
,CC
A,6C
,A6
,1C
A,2C
,776
,88C
,1C
A,16C
,1C
A,16C
6,81C
7,C8C
6,712
6,6A
6,61
6,827
6,1C
6,1C
6,71C
7,1C
7,12C
7,12C
7,C1C
6,66C
7,C7C
6,8C
Glossary of abbreviations
ACC Associated Cement Companies
AFR alternative fuel and raw materials
BIS Bureau of Indian Standards
CAGR compound annual growth rate
CO
2
carbon dioxide
CPP captive power plant
CSR corporate social responsibility
EBITDA earnings before interest, taxes,
depreciation, and amortization
FY financial year
GCF gross capital formation
GDP gross domestic product
GST Goods and Services Tax
GW gigawatt
ITC industrial training center
ITI industrial training institute
kcal kilocalorie
kg kilogram
kWh kilowatt hour
LTIFR lost time injury frequency rate
M&A mergers and acquisitions
MTPA million tonnes per annum
NGO non-governmental organization
NHAI National Highways Authority of India
NO
x
mononitrogen oxides
NSR net sales realization
OPC ordinary portland cement
PLC portland limestone cement
PPC portland-pozzolan cement
PSC portland slag cement
PWD Public Works Department
R&D research and development
RMC ready-mix concrete
ROCE return on capital employed
TPD tonnes per day
TSR thermal substitution rate
VAT value-added taxes
WHR waste heat recovery

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CementVision2025ScalingNewHeights

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1 Cement Vision 2025: Scaling New Heights

Cement Vision 2025:

Excess capacity (MTPA)

Total cement production

168.A A7.7 .C 2.1 A.A 12.1

Philippines Italy United

Ceneht capacity (nillioh tohhes per year)

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