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Cement Industry

Growth of the sector

India is the second largest producer of cement in the world. India’s cement industry is a vital part of its economy, providing employment to more than a million people, directly or indirectly.

Cement prices in India recorded a 6.7% month-on-month growth in April 2017, thereby indicating the probability of growth in volume and profitability of cement companies’ .The housing sector is the biggest demand driver of cement, accounting for about 67 % of the total consumption in India. The other major consumers of cement include infrastructure at 13%, commercial construction at 11% and industrial construction at 9%.

The Indian cement industry is dominated by a few companies. The top 20 cement companies account for almost 70% of the total cement production of the country. A total of 188 large cement plants together account for 97%of the total installed capacity in the country, with 365 small plants account for the rest. Of these large cement plants, 77 are located in the states of Andhra Pradesh, Rajasthan, and Tamil Nadu. According to data released by the Department of Industrial Policy and Promotion (DIPP), cement and gypsum products attracted Foreign Direct Investment (FDI) worth $5.24 billion between April 2000 and March 2017.

The government has also taken several initiatives to augment the growth of this industry. The Government of Chattisgarh has auctioned one block of Limestone (Kesla II) in Raipur District having estimated reserves of 215 million tonnes valued at Rs 10,367crore ($ 1.61 billion), and would earn a cumulative revenue of  Rs 11,894 crore ($ 1.85 billion) to the state government over the lease period. The eastern states of India are likely to be the newer and virgin markets for cement companies and could contribute to their bottom line in future. In the next 10 years, India could become the main exporter of clinker and gray cement to West Asia, Africa, and other developing countries of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for exports and will logistically be well armed to face stiff competition from cement plants in the interior of the country. With help from the government in terms of friendlier laws, lower taxation, and increased infrastructure spending, the sector will grow and take India’s economy forward along with it.

Challenges

The cement industry is facing growing challenges in conserving material and energy resources, as well as reducing CO2 emissions. Cement producers are striving to increase energy efficiency and the use of alternative raw materials and fuels. Therefore, the use of alternative fuels has already increased significantly, but the potential for further increases still exists. In a modern cement plant, 60% of the CO2 emitted by a cement plant results from the calculations of limestone, 30% from combustion of fuels in the kiln and 10% from other downstream plant operations.

Since 2007-08 import of cement into India is freely allowed without having to pay basic customs duty whereas all the major inputs for manufacturing cement such as Limestone, Gypsum, Coal, Pet coke, Packing Bags etc. attract customs duty. Presently due to low demand of cement in the country more than 116 million tonnes of domestic cement capacity is lying idle and duty free import of cement causes further undue hardship to the Indian cement industry already reeling under low capacity utilization. The pre-Budget Memorandum of 2018-2019 by FICCI thus suggests, “It is requested that to provide a level-playing field, basic customs duty be levied on cement imports into India. Alternatively, Import duties on goods – Coal, petcoke, Tyre Chips, Limestone, Packing Materials & Bags, Gypsum, and Refractories etc. -required for manufacture of cement are abolished and freely allowed without levy of duty.”

2017-18 Budget allocation

1. Finance Minister Arun Jaitley raised the allocation for roads from Rs 57,976 crore in 2016-17 to Rs 64,900 crore in 2017-18, with a stress on laying 2,000 km of coastal roads. Cement comprised 30% of the cost of laying a road and the budgetary allocation would translate into a Rs 19,470 crore opportunity for the sector.

2. With the proposition to construct one crore houses by 2019 for homeless under the Pradhan Mantri Awaas Yojana raising the allocation from Rs 15,000 crore to Rs 23,000 crore is a great boon for cement industry.

3. The proposed speeding up of the construction of roads, under the Pradhan Mantri Gram Sadak Yojana (PMGSY), from 73 km from 2011-2014 to 133 km of roads per day in 2016-2017, would improve connectivity and boost the cement industry.

Hospitality and Tourism Industry

Growth of the sector

India is a large market for travel and tourism. It offers a diverse portfolio of niche tourism products - cruises, adventure, medical, wellness, sports, MICE, eco-tourism, film, rural and religious tourism. India has been recognised as a destination for spiritual tourism for domestic and international tourists.

Total contribution by travel and tourism sector to India’s GDP is expected to increase from $136.3 billion in 2015 to $275.2 billion in 2025. India ranked third among 184 countries in terms of travel and tourism’s total contribution to GDP in 2016. Travel and tourism is the third largest foreign exchange earner for India. A sum of $22.089 billion was earned under foreign exchange through tourism during January-October 2017. The employment in the sector is expected to rise to 46.42 million by 2026. During January – October 2017, 7.996 million foreign tourists have arrived in India.

The launch of several branding and marketing initiatives by the Government of India such as ‘Incredible India!’ and ‘Athiti Devo Bhava’ have provided a focused impetus to growth. The Indian government has also released a fresh category of visa - the medical visa or M-visa, to encourage medical tourism in the country. Incredible India 2.0 campaign was launched in September 2017.

The government has also been making serious efforts to boost investments in tourism sector. In the hotel and tourism sector, 100% FDI is allowed through the automatic route. A five-year tax holiday has been offered for 2, 3 and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai). The investment in tourism sector is expected to be $12.4 billion in the 12th Five Year Plan; of these, private investments are likely to total $9.2 billion. Total FDI received by Indian hotel and tourism sector was   $10.6 billion between April 2000 and September 2017.

Challenges

Tourism is extremely labour intensive and a significant source of employment. It is among the world‘s top creators of jobs requiring varying degrees of skills and allows for quick entry into the workforce for youth, women and migrant workers. Tourism and hospitality industries create many employment opportunities in different areas like accommodations, transportation, attractions sites. Therefore, the availability of skilled and trained manpower is a crucial element in the success of any tourism development plan or programme.  However, the constraints of employment in tourism industry are unstable employment, low job status, long antisocial working hours and low pay. The immediate and most obvious consequences of such a situation is the difficulty of recruiting suitable staff and high staff turnover, these are costly to the success of the industry. The current challenges include tourist safety (especially for women travelers) and sanitation. After the implementation of GST, the sector has been pressurized under the high tax burden. Ritesh Agarwal, Founder & CEO, OYO, said, “We expect  that the coming Budget reduces.corporate tax rates to 25%, and effects administrative and tax reforms suggested by Easwar Committee - this will go a long way in ease of doing business in the country. The GST was the biggest and most important tax reform we saw in 2017 which is good for the country but the challenges in its implementation need to be streamlined. Although the government has released clarification for application of taxes on declared tariff, we expect the concept of declared tariff to be replaced with actual tariff as consideration for the GST on hotel accommodation - as is the case with other industries. The government has executed strong fiscal discipline in the last few years while enabling more startups and jobs through Skill India. We are hopeful that this momentum continues and there’s ample availability of skilled talent in the country not only for us but every company that has both online and offline presence.”

2017-18 Budget allocation

1. On  the tourism and related infrastructure front, the Budget saw several announcements for railways, aviation, road and coastal connectivity. Selected airports in tier-II cities had been identified for taking up operations and development under PPP model.

2. The focus of railways for the 2017-2018 fiscal was on passenger safety, capital works and cleanliness, among other issues such as infrastructure upgradation and provisions for passengers. The railways took steps for launching dedicated trains for tourism and pilgrimage purposes.

3. Indian Railway Catering and Tourism Corporation (IRCTC) announced  the launch of  the first pilgrim train for the North East region on February 17,  that connected destinations like Jagannath and Konark temples.

4. In another highlight of the Budget promoting the government’s digital initiatives, service charge on e-tickets booked through IRCTC have been withdrawn. The government removed all duties on devices used in the process of cashless transactions like point of sales machines, finger print readers etc.

5. Rs 1.3 lakh crore had been allotted for solar power and disabled-friendly railway stations. Rail safety fund with a corpus of Rs 100,000 crore is to be created over a period of five years. Jaitley announced a total of Rs 55,000 crore for railways in Budget 2017, whereas, the transport sector in general had been allocated Rs 2.41 lakh crore.

7. Budget allocation for highways was stepped up to Rs 64,000 crore in FY18 from Rs 57,676 crore. In another traveller-oriented move apart from tourism and pilgrimage trains, Head Post Offices will now be used as the front office for passport services, eliminating the need to travel long distances for obtaining a passport.

Indian textile and apparel industry

Growth of the sector

India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to India’s exports with approximately 13% of total exports. The textiles industry is also labour intensive and is one of the largest employers. The textile industry has two broad segments. First, the unorganised sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organised sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.

The textile industry employs about 45 million people directly and 20 million people indirectly. India’s overall textile exports during FY 2015-16 stood at $ 40 billion. The Indian textiles industry, currently estimated at around $ 120 billion, is expected to reach $ 230 billion by 2020. The Indian Textile Industry contributes approximately 2% to India’s Gross Domestic Product (GDP), 10% of manufacturing production and 14% to overall Index of Industrial Production (IIP).

Indian khadi products sales increased by 33% year-on-year to Rs 2,005 crore ($ 311.31 million) in 2016-17 and is expected to exceed Rs 5,000 crore ($ 776.33 million) sales target for 2018-19, as per the Khadi and Village Industries Commission (KVIC).

The production of cotton in India is estimated to increase by 9.3% year-on-year to reach 37.7 million bales in FY 2017-18. The total area under cultivation of cotton in India is expected to increase by 7% to 11.3 million hectares in 2017-18, on account of expectations of better returns from rising prices and improved crop yields during the year 2016-17.

Indian exports of locally made retail and lifestyle products grew at a compound annual growth rate (CAGR) of 10% from 2013 to 2016, mainly led by bedding bath and home decor products and textile. The Union Ministry of Textiles, Government of India, along with Energy Efficiency Services Ltd (EESL), has launched a technology upgradation scheme called SAATHI (Sustainable and Accelerated Adoption of Efficient Textile Technologies to Help Small Industries) for reviving the powerloom sector of India.

The Government has planned to connect as many as five crore (50 million) village women to charkha (spinning wheel) in the next five years with a view to providing them employment and promote khadi and also, they inaugurated 60 khadi outlets which were renovated and re-launched during the completion of KVIC’s 60th anniversary and a khadi outlet.

The Textiles Ministry will organise ‘Hastkala Sahyog Shivirs’ in 421 handloom-handicrafts clusters across the country which will benefit over 1.2 lakh weavers and artisans.

Challenges

The sector is threatened by issues like obsolete technology and machinery, sickness of the cotton industry reeling under the limited availability of raw materials. Also, the chemicals, the industry employs are linked to several kinds of cancers, including brain cancer, lung cancer and stomach cancer. Extended exposure to high levels of noise from industrial equipment puts workers at risk for hearing loss, as well as fatigue and sleep problems. Textile workers also experience higher risks for conditions such as carpal tunnel syndrome and tendinitis.

The textile industry also faces an ongoing problem with the use of child labor, broadly defined by the International Labor Organization as work performed by anyone between the ages of 5 and 18 that violates the child’s human rights, safety and educational opportunities. As many people now consider clothing a disposable commodity and the cycle time between shifts in fashion trends grows ever shorter, the industry faces an overtime problem. According to The Financial Times, many of these overtime problems occur as the result of poor management by the companies ordering the textiles. Last minute design, material and even color changes, as well as inaccurate demand forecasting, often creates additional work on the factory floor without a corresponding extension to the delivery deadline.

Textile production creates numerous negative environmental impacts. Growing cotton requires high levels of pesticides, which settles into the soil and possibly water supply. Synthetic materials, such as nylon, are made from oil. The production processes for synthetic materials, in addition to their high energy demands, create dangerous pollution and require large volumes of water. As the low availability of finance is one of the industry’s major problems, the government is arranging for a reasonable amount of working capital to be made available through banks and financial institutions. The industry thus witnessed a spurt in investment during the last five years. The industry (including dyed and printed) attracted Foreign Direct Investment (FDI) worth $2.68 billion during April 2000 to September 2017.

2017-18 Budget allocation

1. Government’s flagship technology upgradation scheme ATUFS received an allocation of Rs 2,013 crore for 2017-18. Scheme for in situ upgradation of plain power looms received a budget of  Rs 68.31 crore which is a big budgetary boost form `48 crore last year. Under this scheme, power loom owners would get government’s support to upgrade weaving technology without replacing the whole loom.

2. Allocation under Remission of State Levies had been increased sizably to Rs 1555 crore. This scheme includes the refund of State taxes to garments exporters to make the industry competitive and to boost employment in this Sector.

3. Fund allocation under the Pradhan Mantri Paridhan Rojgar Protsahan Yojna (PMPRPY) was Rs 200 crore. This scheme provided the Employee  Pension Scheme contribution of 8.33% of the employers for all new employees  enrolling  in  EPFO  under  PMRPY  for  the  first three  years  of  their  employment. Again, this is to boost employment in textile sector by incentivising the employers and improving competitiveness.

4. Integrated Scheme for Skill Development for the textile sector received Rs 174 crore which was operational for last several years for under skilled factory workers.

5. Basic Customs Duty on Nylon mono filament yarn (for use in long line system for Tuna fishing only) reduced to 5% (from earlier 7.5%).

6.Textile and Apparel industry would benefit from Trade Infrastructure Export Scheme with an allocation of
Rs 3.96 lakh crore.