Cement production growth declines in 1998-99 — CMA

However, the package for the housing sector announced in the budget was likely to boost the demand for cement in the current fiscal, the sources said. Overall cement growth rate was expected to increase this fiscal to 7-8 per cent led by higher demand from the housing construction sector, credit rating agency, Crisil said in its budget analysis.

Demand for cement would grow as 50 per cent of additional duty imposed on diesel was to be earmarked for central road fund – which would in turn get invested in state roads and expressways, ICRA, another credit rating agency said.

The decline in growth rate in 1998-99 was in tune with industrial slowdownand third year of sluggish offtake in succession, they said. Dispatches from manufacturing units stood at 81.79 million tonne in 1998-99 showing a rise of 6.82 per cent over previous year figures.

About 6.15 million tonne cement production capacity was added in 1998-99, CMA sources said. The per capita consumption of this construction material was 86 kg, almost one-third of the world average consumption of cement, sources said.

While overall production was ahead of demand, the supply demand imbalances were pronounced in specific areas leading to bruising competition among companies particularly recent entrants in regions with most mismatch, they said.

Prices of cement are influenced by regional situations, and current and over supply situation in market has resulted in pressure on prices, Crisil said.

Increase in freight rates by four per cent in the railway budget for 1999-2000 would result in cost of transporting coal and cement by rail, Crisil said. Hike in transportation cost – accounting for25-30 per cent of the cost of sales, coal imports and additional surcharge on corporate tax would dampen profitability of this sector, in 1998-99, Crisil added.