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: Cement

High government spending on infrastructure projects across the country and partial revival in the real estate sector are helping the cement industry to operate at full capacity. Cement production in the second quarter increased by 12% as compared to 8% in the first

quarter of this financial year, indicating the strong correlation with the growth in certain sectors.

In the past five years, the real GDP from the construction industry has grown at a high rate, prompting many cement companies to go for new capacity addition. However, with the slowdown, production was affected but has now started picking up, prompting companies to ramp up their capacity. South India accounted for about 30% of the total domestic cement consumption in the quarter ended September this year, followed by northern and western states. Regional disparity is being witnessed with southern and northern states accounting for over 50% of the consumption because of both private and public sector construction activities. Cement prices also vary on a regional basis, because of local demand and supply conditions. Prices are generally lower in southern states, where there is excess supply.

With the increase in demand for cement, capacity utilisation has moved up to 88% and is expected to be around 89% next year. Excess supply in the industry resulted in low capacity utilisation till 2003. But with increase in demand and slow new-capacity addition, capacity utilisation started improving and hit 96% last year from 76% in 2002.