Problems & Prospects of Cement Industry in India

By DHARAMSEY M. KHATAU

Summary

Dharamsey M. Khatau’s pamphlet — based on his presidential welcome address of 18 January 1965 marking fifty years of the Indian cement industry — is at once a celebratory history and a sustained critique of governmental price control. Tracing the industry from its first successful Portland-cement run in October 1914 (under 1,000 tonnes) to a one-crore-tonne mark by the mid-1960s, Khatau credits the Concrete Association of India (1927), the Indian Cement Manufacturers’ Association, the Tariff Board, and the wartime Department of Planning for shepherding the industry through hostile colonial markets, raw-material shortages, and the post-war rate war that culminated in the formation of the Associated Cement Companies in 1936. He frames the present scarcity not as a failure of producer effort — the 34 private-sector units have run at roughly 95% of installed capacity for three years — but as the predictable consequence of a state pricing regime that has starved a basic industry of expansion capital.

The core polemic targets the Tariff Commission’s price-fixation order of November 1961, ad-hoc adjustments that recovered only Rs. 3.75 per tonne against an actual cost rise of Rs. 5.91, and the foreign-exchange and licensing bottlenecks that have widened the gap between demand and supply. Khatau argues that controlled prices have prevented manufacturers from paying dividends adequate to attract new equity, denied retained earnings for modernisation, and effectively diverted capital from priority sectors — a diagnosis he reinforces by quoting a World Bank Mission view that price control in key industries has hurt coal and cement most. He details the Cement Manufacturers’ Association’s proposals for a special Expansion Allowance, the case for letting the private sector add the 50-lakh-tonne Fourth Plan increment instead of expanding the Public Sector, and grievances over ‘mixed’ jute-bag packing requirements that raise seepage losses.

The pamphlet closes on a more constructive note: the establishment of the Cement Research Institute of India on 24 December 1962 (jointly sponsored by CSIR and the Association on a 50:50 basis), the entry of seven undertakings into indigenous cement-machinery manufacture, and the industry’s record on rural labour welfare — schools, hospitals, X-ray facilities — endorsed by both the 1946 Labour Investigation Committee and the latest tripartite Cement Wage Board. Published by the Forum of Free Enterprise and bookended by sidebar quotations from Eugene Black and A. D. Shroff, the booklet positions private enterprise in cement as a battle-tested partner in national development that will rise to the Fourth Plan task only if a ‘proper climate’ of remunerative pricing is created.

Key points

• Indian cement output rose from under 1,000 tonnes in 1914 to roughly one crore tonnes by 1964–65, with 34 private-sector units running at about 95% of installed capacity over the preceding three years.

• Khatau locates the current scarcity in the Government’s pricing and licensing policy, not in any deficit of producer effort or capacity utilisation.

• The Tariff Commission’s price structure of 1 November 1961 and subsequent ad-hoc adjustments recovered only Rs. 3.75 per tonne against an actual cost rise of about Rs. 5.91, costing the industry Rs. 3.25 crores between 1 June 1963 and 30 June 1964 alone.

• Controlled prices have starved the industry of capital — denying adequate dividends to shareholders, blocking access to the equity market, and preventing internal accruals for modernisation.

• The Association has proposed a special Expansion Allowance to fund the additional 50-lakh-tonne capacity sought in the Fourth Plan, arguing that private capacity is more economic than further Public Sector entry.

• Foreign-exchange constraints have pushed standard plant costs from roughly Rs. 3.2–3.4 crores down to about Rs. 50 lakhs of foreign exchange today, intensifying the case for indigenous cement-machinery manufacture (now undertaken by seven firms).

• The Cement Research Institute of India was registered as a society under the Association’s auspices on 24 December 1962, jointly sponsored by CSIR and the industry on a 50:50 basis.

• Both the 1946 Labour Investigation Committee and the most recent tripartite Cement Wage Board recognised the cement industry as ahead of comparable industries in providing housing, education, medical care and welfare amenities at remote factory sites.

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