CEMENT INDUSTRY IN INDIA

Summary

Reprinted from The Times of India of 5 and 9 October 1956, this Forum of Free Enterprise pamphlet by N. Dandekar and L. Sawhny offers a stewardship audit of the Indian cement industry as a case study in what private capital, organised through the Associated Cement Companies Ltd., has achieved for the country. The authors trace the industry’s history from the failed Madras factory of 1904 through the boom and bust of the inter-war years, the 1936 consolidation that produced ACC, and the post-Independence expansion that nearly trebled production between 1948 and 1955 — reaching 4.4 million tons in 1955 and beating the First Five-Year Plan target.

The core argument is that the cement industry has met both the social and economic obligations set out in the Forum’s Manifesto: producing a basic infrastructure good of comparable quality to the best in the world, holding the rise in cement prices to 179 per cent against an all-industry index of 288 per cent, employing 22,000 people on long-term contracts with welfare provision well above the norm, and distributing modest dividends (an average of 5.65 per cent on invested capital over ten years). The authors stress that cement is sold only at Government-approved prices, that 92 per cent of company capital is held by a broad cross-section of the public, and that some 70 per cent of the managing agents’ commission flows back to Government as tax — pre-empting common critiques of “monopoly”, “profiteering” and concentration of economic power.

The closing pages defend the managing agency commission, point to ACC’s voluntary expansion plan (to 5.2 million tons by 1961, requiring Rs. 30 crores of fresh capital without Government assistance), and emphasise that the industry has built up indigenous machinery-making capacity covering 70 per cent of cement-plant requirements, saving foreign exchange. The article culminates in an explicit ideological claim: that this stewardship is precisely how free enterprise works in a free democratic country, deserving — in the Forum’s view — to be “increasingly encouraged and relied upon” rather than supplanted by the state.

Key points

• Frames the cement industry as a test case for the Forum of Free Enterprise’s Manifesto claim that private enterprise meets both economic efficiency and social propriety standards.

• Traces industry history: 1904 Madras failure, WWI revival, 1919-1924 over-expansion and losses, 1925 Indian Cement Manufacturers Association, 1936 merger producing Associated Cement Companies Ltd.

• Documents that cement production rose from 15.42 lakh tons in 1946 to 44.16 lakh tons in 1955 — nearly trebling between 1948-1955 and exceeding First Five-Year Plan targets.

• Argues quality is comparable to fully industrialised economies, tested by the Indian Standards Institution and the Government Test House at Alipore.

• Highlights that cement is sold only at Government-approved prices since 1953, with the industry voluntarily reducing prices on at least one occasion; cement-price rise (179%) is roughly half the all-industry wholesale index increase (288%) since 1939.

• Describes employment of 22,000 workers with welfare provisions — schools, hospitals, creches, canteens, gratuity, provident fund — emphasising that wages and benefits rose 39 per cent during 1948-49.

• Counters the concentration-of-power critique with shareholding data: 28,747 holders of 100 shares or less (94.7%), with 43 private shareholders holding only 8% of issued stock.

• Defends the managing agency commission by showing roughly 70% of agents’ commission accrues to Government via taxation, and announces a Rs. 30 crore expansion plan to reach 5.2 million tons by 1961 without Government finance.