56 CONSTRUCTION WEEK JULY 2019
CEMENT
GST for the cement sector is 28%. In addition, cyclic or sea-
sonal demand-supply factors even out prices in the long run.
Cement prices rise due to demand pull. For us, cement prices
have fallen in most markets in FY19 between 2.5-4.5% on a
Y-o-Y basis. We are dependent on the government’s push on
the housing sector, rural economy and continued focus on
the roads and railways.”
The company has invested in low carbon technologies that
have since translated into enhanced resource and energy ef-
ficiency. It progressively increased the proportion of environ-
ment-friendly blended cement within its product mix to ~80%,
reducing the company’s carbon footprint while addressing
waste disposal issues of other industries.
Understanding that cement is a volatile commodity, de-
velopers are smart enough to start procuring ahead of the
start of the project. Shivamurthy KB, associate VP, proj-
ects, Adarsh Developers, says, “It is imperative that devel-
opers consider market data of last three years to determine
an overall price trend. They can also depend on recent price
trends to understand the price volatility based on the budget
plan. Another way is to see the forecast for next three years
by looking at factors likely to affect the market’s supply chain
to figure out the best time to purchase. On our part, we also
check the availability of products from each supplier and look
at back-order times.”
On the other hand, one South India based company at-
tempts to address inefficiencies in vendor management and
bid management processes when buying cement. Rakesh
Reddy, director, Aparna Constructions & Estates, says, “We
have a continuously evolving system of best practices that is
designed to increase efficiency and mitigate risk. One of our
key principles of procurement is the use of automation. This
helps manage the aggregation and analysis of incoming data
such as price volatility. We have created a smart system that
can quickly determine cost savings and opportunities. As a
rule, we also try to engage with as many bidders as possible
to ensure diligence and widen our pool of suppliers.”
Poddar believes that if one is an established player in the
market, then one can form strategic partnerships with ce-
ment companies to procure.
Reddy says, “Currently, cement supply assurance is one
of the largest and fastest growing procurement risks in the
real estate sector. To manage this risk while maintaining the
highest benchmarks of construction quality, we have imple-
mented backward integration. This entails vertical integration
in which Aparna Constructions has set up its own building
material facilities to ensure a more reliable or cost-effectiveDEMAND HAS
SLOWED DOWN BUT
PRICES REMAIN HIGH
BECAUSE OF CAPACITY
UTILISATION OF COMPANIES.
ROHIT PODDAR
WHAT CONTRIBUTES
TO THE INCREASE IN
DEMAND AND PRICE OF
THE CEMENT IS THE LOW
THREAT FROM SUBSTITUTES.
SAMYAK JAIN Cement plants too are expanding capacities to meet demand.