In for a comeback, again
There could not have been a better way for the Indian cement companies to usher in the new millennium. Everything seems to be going their way. Industrial production is up, housing construction is picking up again, financial institutions and the housing finance companies are disbursing lot more funds than they did in the near past.

Editorial
India, perhaps, is the only country in the world offering incentives for setting up new cement capacities. But, these tax incentives offer an unfair advantage to the new players by allowing them to retain the sales tax collected from consumers.

RMC gains ground
Some time back the focus was on branding, now it is on value-addition. At last, local cement manufacturers are catching up with world trends. Areas that they are looking at are bulk transport and the ready-mix concrete (RMC) market.

The long and the short of it
The Most important factor that decides the location of a cement plant is its proximity to the source of limestone. Since cement manufacturing is a weight-losing process, (for a tonne of cement 1.2-1.3 tonne of limestone is required), it makes sense to locate the plant near a limestone mine.

Takeovers
When India Cements (ICL) took over Raasi at Rs 300 per share (ruling market price of Raasi -- Rs 60), it wrongly created a perception of an expensive acquisition. At Rs 2,883 per tonne, the acquisition was at a discount to a greenfield cost of Rs 3000 per tonne.

Mini(mising) cement profits
Mini cement plants (MCPs) were first conceptualised in the 1980s for the main purpose of tapping the scattered limestone reserves in the country. Setting up a large cement plant of minimum economic capacity of over one million tonne, with these scattered limestone reserves, was not commercially viable.

`Controlled' inputs in a decontrolled industry
As Guwalewala, advisor, Gujarat Ambuja Cements points out -- "We try to control costs on all fronts. Reduction is aimed at both the cost of power generation and the number of power units required to produce cement".

Is the party on at the bourses?
It could be the proverbial icing on the cake. The mandarins, perhaps, might not have realised this when they proposed to withdraw the sales tax incentives for building new cement plants.

Prism -- Timely action
PPISM Cement was conceived towards the end of the last industrial boom. It began its commercial production by the end of 1997, when the entire industry was reeling under severe recession. Not only that, its target market enjoyed a cement surplus at the time, with little hint of any rise in demand.

GACL -- Concrete bottomline
GACL alongwith L&T are two of the least cost cement producers in the world. One of the biggest advantages enjoyed by GACL is utilisation of fiscal incentives like the sales tax exemption and freight subsidy. The freight subsidy is in HP and is available to ACC as well.

How they mind their pockets
In India, cement prices are purely a function of cartels (except in Western India where they are short-lived). Pricing for the cement cartels depends on plant location, which determines the sales tax benefit and the direct costs. The sales tax incentives vary from state to state.

In Conversation
ACC president (marketing) AK Jain in an interview with FE Thinktank, spoke about the current trends in the industry.