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PESTLE Analysis of Cement Industry

The price of cement is primarily controlled by following rates which are predominantly control by government: Coal rates Power tariffs Freight (Railway and road tariffs) Royalty and cess on limestone Taxes (Excise duty and VAT) Govt. of India plans to increase its investment in infrastructure to US $ 1 trillion in the Twelfth Five Year Plan (2012-17) will lead to increase in the demand of cement Infrastructure projects such as the dedicated freight corridors, upgraded new airports and ports are expected to enhance the scale of economic activity, leading to a substantial increase in cement demand furthermore Most state governments, in order to attract investments in their respective states, offer fiscal incentives in the form of sales tax exemptions/deferrals. States like Haryana offer a freeze on power tariff for 5 years, while Gujarat offers exemption from electric duty During election period, cement demand increases as compare to normal period. So, during 2013-2014 state assembly elections cement demand will be higher Govt. programs like NREGS, Indira Awaas Yojana, rising minimum support prices enhance rural income which boosts cement demand in rural areas NHAI plans to award road projects worth of Rs 57000 crores in FY 2012 The total Government levies and taxes, which include Royalty on Limestone, Royalty on Coal, Electricity Duty, VAT/Sales Tax etc., on cement constitute about 60% or more of the ex-factory price of cement. The levies and taxes on cement in India are far higher compared to those in countries of the Asia Pacific Region Strict law & order conditions and political will of the leader of any state enhance the confidence of people living in the states as well as corporate to invest in that particular state

Cement demand is proportional to growth in GDP of the nation. Average cement demand to GDP ratio was 1.2 during the last decade. The cement industry is growing at the rate of 8 to 10 % CAGR following the growth rate of GDP The per capita consumption of cement in India (about 155 kg) is much less compared to average per capita consumption (about 380 kg) for the rest of the world. Hence Indian cement industry has large potential to grow Any instability in the world economy like political instability in Middle East countries can lead to huge increase in the crude oil prices and thus increasing the cost of fuel, power and freight considerably Formal approval granted to 577 SEZ proposals Growth in tourism sector fuelling the increase in the construction of hotels in the country Upcoming industrial clusters and infrastructure development in emerging tier-II and tier III cities The growing population and increased urbanization in the country Increasing per capita income leading to increase in housing demand to meet the current shortages and future growth

The cement manufacturing units- with a slight regional imbalance -is spread all over India Indian consumers prefer buying branded cement like ULTRATECH, JAYPEE CEMENT, LAFARGE CEMENT etc. It has been seen in the past, as well, that mini cement plants with low brand value and image are not able to survive against the cement giants Looking at the growth rate of Indian cement industry and capacity expansions, it is expected that cement industry will create good number of jobs in the next 4-5 years

It can be seen that the wet process is rapidly replaced by the dry process. It reflects increasing needs for energy conservation and suggests what the true cement plant of the future should be Technological development in the design of cement kiln and furnace can promote use of cement kiln for utilization of wastes like tires etc. which can help in reducing the usage of costly fuels like coke, coal etc. thereby reducing the manufacturing cost of cement Enhanced technology will be needed to substitute coal with low cost and eco friendly alternative fuels like fuel from bio-mass wastes including fruit of Jatropha Carcus, Pongamia and Algae Effectively finding the location of limestone reserves and efficient mining practices can lead to reduction in per tonne cost of limestone

Land acquisitions for limestone mining land, setting up of integrated units and grinding units requires proper legal procedure

In India, the permissible stack dust emissions from various sources for existing cement plants is 150 mg/Nm3 and 100 mg/Nm3 for plants located in critically polluted areas. However, the limit for new plants in our country is 50 mg/Nm3 which is at par with some of the developed countries Since the cement production is an energy intensive process with very high emission, it has to use state of art equipment to have energy efficiency and meet environmental standards Under PAT1 scheme, each particular unit (Designated Consumers (DC)) will be given Specific Energy Consumption (SEC) target to meet over a period of three years. Any additional saving will qualify for earning Energy Saving Certificates (ESCerts), which could be traded, with DC's who could be short of targets. This trade can be made bilaterally or through exchange.

Perform, Achieve & Trade (PAT) scheme is promoted under the National Mission on Enhanced Energy Efficiency (NMEE) which will help energy intensive large industries units in India to enhance cost effectiveness in terms of energy efficiency.