The onset of the monsoon has led to decrease in demand from the construction industry, which has dampened the demand for cement. The hike in interest rates has also affected realty sales, which are already at unaffordable highs
The onset of the monsoon has led to decrease in demand from construction industries, which has dampened the demand for cement, thereby exerting pressure on the prices. While cement prices remain soft in the monsoon, the extent of the drop in rates obviously depends on the demand. This year, demand has been especially bad.
Yesterday (Slowdown spreading across all core sectors in India), Moneylife had pointed out that during FY2011, eight core industries-coal, crude oil, natural gas, petroleum & refinery products, fertilisers, steel, cement and electricity had registered a growth of 5.72% against 6.64% a year ago, mainly due to sluggish demand.
Energy-intensive manufacturing units have reported a dull performance. The rate hike announcement by the Reserve Bank of India (RBI) on 16th June may further dampen demand.
How will poor demand impact the cement and the realty sector?
According to data from Emkay Global Financial Services, March 2011 saw a peak in prices of cement bags—the average price of cement across India was Rs276/bag, up by 18% from the average price of Rs233/bag in December 2010. The prices have corrected since—the average price in May was Rs269/bag, a drop of 3%. Up to 11th June, prices have gone down further to Rs261/bag.
Analysts say there will be a further price correction due to the fall in demand and increase in production capacities. The sustainability of current prices depends upon the pick-up in construction activities.
"There are no major infrastructure projects announced by the government; many projects are awaiting clearance, so demand hasn't picked up. In March, the prices of cement bags were at their peak. Now prices have fallen by Rs10-Rs40 per bag and further correction is expected. Utilisation in southern regions has been falling, though the central and northern regions have maintained around 90% and around 75-80% utilisation." said an analyst from a leading broking firm, preferring anonymity.
According to the Emkay report, "The sector continues to be plagued by cost pressures (the recent news flows of sharp hike in regulated coal prices in Indonesia could further dent margins as fuel costs might increase further), which in turn would put severe pressure on profitability of manufacturers over the next 2-3 quarters."
The realty sector, a major consumer of cement, is experiencing a severe crunch as well. The exorbitant prices of real estate have put off buyers and the loss in revenues is leading developers to default on their loan repayments.
The hike in interest rates by the central bank could result in banks passing on the rate hike to customers and home loans could become more expensive. This would put off buyers even more, leading to a further slump in demand.
The Union ministry of housing has reported that by 2012, India will need 26.30 million houses- but 92,000 units remain unsold in Mumbai.
"Around 180 units sold in Mumbai from January to March 2011 were priced above an average capital value of Rs20,000/sq ft. No wonder the market is slowing down perceptibly now. Around 3,350 units priced at Rs20,000/sq ft and above remained unsold by the end of March 2011 in the city," Himadri Mayank, manager—research & real estate intelligence service, Jones Lang LaSalle India told Moneylife.
Many developers have fared badly, leading to a pile-up of unsold inventory. If this continues, it won't be long before developers resort to fire sales, leading to a crash in real estate prices.
The Sea Link will cost an estimated Rs15,000 crore when it is completed in 15 years, and only a small number of people would use this facility. On the other hand, the Bus Rapid Transit System could cost only about a fifth, it would benefit almost all citizens in the city and would also help in times of disaster
Emerging Mumbai needed a new icon. The Gateway of India, built to commemorate the visit of Britain's King George V and Queen Mary to Bombay in 1911 has been the city's icon since, for the people of Mumbai, the rest of the country and the world at large. The Grand Indian Peninsular (GIP) Railway's Victoria Terminus, now called Chhatrapati Shivaji Terminus (CST), was erected in 1887 to celebrate Queen Victoria's Golden Jubilee, and the Bombay Municipal Corporation's headquarters, across the road from CST, has existed since 1893. These were icons too in the years gone by and they stand out in grandeur even today.
Travelers from abroad and folks from the Konkan, coming to Bombay by steamer, enjoyed the majestic view of the Gateway of India as they entered the harbour. The Victoria Terminus at Bori Bundar was a symbol of the grandeur of the GIP Railways. But emerging Mumbai, in this 21st century, needed a symbol of modernity, as the commercial capital of India and a financial centre this side of the globe, something that would go beyond the icons of British colonial times. Roads and bridges have been symbols of progress, ever since automobiles came into being in the early 20th century and they are growing in number, rapidly, even today.
With the growing car population trying to get through the Mahim Causeway, and many headed to the Nariman Point business district, it was felt that a new road be constructed across the sea, going all the way to Nariman Point from Bandra, where it could connect with the Western Express Highway, and have landings or connecters at Worli, Haji Ali and Napean Sea Road.
Ordinarily a sea link is an unromantic piece of infrastructure. It would come nowhere near the Golden Gate Bridge in San Francisco Bay, or the Brooklyn Bridge in New York. Luckily, the need for free movement of boats of Worli village fisher folk and flow of tidal waters and the Mithi River, necessitated the building of a cable-stayed bridge spanning 500 metres. The plan also necessitated providing two shorter cable-stayed spans, each of 150 metres, on the first leg of the sea link from Bandra to Worli. The Sea Link is now Mumbai's icon. It's a magnificent view, as one takes off from Santacruz airport, or travels along the Mahim Causeway, whether during the day or at night. And it has been appropriately named the Rajiv Gandhi Samudra Setu, after the former prime minister who opened the doors of modernity to the citizens of the country.
The four-plus-four lane Sea Link was planned at an estimated cost of Rs400 crore, but after much delay and minor realignments, it was completed at a cost of about Rs1,600 crore. Work on the next leg, from Worli to Haji Ali, is to commence by the end of 2011 and it is expected to cost Rs1,900 crore. Though average daily vehicular passage was low when it opened, the numbers seem to have stabilised at about 40,000 according to the current count. That's still far from the utilisation projected in the feasibility report at 80,000 for 2009 that was expected to grow to 1,20,000 by end 2011, by when the second leg was to be ready.
The interesting part is that the traffic count on Mahim Causeway before the Sea Link was thrown open to traffic, was about 1,40,000. Another fact is that the number of people using cars in Mumbai is only about 2.8% of the city's population and there are about 5.5 lakh cars plying on Mumbai roads. Considering that there is a reverse flow of traffic in the post-afternoon period, of near equal magnitude to that in the pre-afternoon period, only about 12% of the car population had been using the Mahim Causeway. Now, the Sea Link carries just about 3.5% of cars in Mumbai. Considering that there are quite a few cars-perhaps about 30%-that are registered outside Mumbai and ply here-only 2.5% of cars plying on Mumbai roads use the Rajiv Gandhi Samudra Setu.
These figures clearly tell us that, (i) only a miniscule percentage of Mumbai's commuting population use cars. (ii) Only a small percentage of the car population in Mumbai used the Mahim Causeway before the Sea Link was opened to traffic. (iii) Only a miniscule percentage of the car population uses the Bandra-Worli Sea Link. (iv) Until the entire Sea Link up to Nariman Point is completed, the benefit from the time perspective will not be significant to those using the Sea Link. (v) The number of cars traveling the entire distance to Nariman Point by road will be even smaller than the number crossing Mahim Causeway.
Leaving aside the fact that the Sea Link stretch beyond Worli is not there, and the traffic on the Worli Seaface and the congestion at Haji Ali, it is worth pondering over the matter of traffic congestion on the Western Express Highway and finding a remedy for that.
The entire four-plus-four lane Sea Link from Bandra to Nariman Point will cost about Rs12,000 crore. Add to this the Bandra-to-Versova 3.5-km link costing another Rs3,000 crore. At a cost of Rs15,000 crore, in about 15 years, you would be able to travel the 30-km distance in 30 minutes. It's anybody's guess how many people will use it, whatever the stretches there might be, even if it is going to be say 30,000 for each of the stretches of Versova-Santa Cruz, Santacruz-Bandra, Bandra-Worli, Worli-Haji Ali, Haji Ali-Napean Sea Road, Napean Sea Road-Nariman Point, the total touches only 1,80,000 vehicles. This is still only about 15% of the current car population registered in Mumbai, not to forget that only 2.8% of Mumbai's population travel by cars. This would mean that Rs15,000 crore will be spent on a mere 0.43% of Mumbai's population.
On the other hand, providing 200 km of the Bus Rapid Transit System (BRTS), along with adequate provision of space for footpaths and NMVs) would cost as little as Rs3,000 crore, take barely three to five years and would serve nearly 100% of Mumbai's population, who choose to use it for whatever distance, while 30 km travel will take about an hour.
It's not about this or that, but it is about prioritising choices, giving consideration to the duration of implementation of the project, the number of people who would be directly benefited, the cost of the project, and whether it would help in mitigating disasters and management.
While the BRTS lanes could be used daily by emergency services like ambulances, the fire brigade and police, and its availability would be invaluable in an emergency situation like the deluge in Mumbai on 26 July 2005, the same cannot be said of the Sea Link, which if flooded with cars could paralyse the city.
There's one more aspect that must be kept in mind as far as the Sea Link is concerned. MV Wisdom is not the only ship to have run aground in Mumbai in heavy rain, strong winds and poor visibility. But it is the first vessel to have floated to the shore since the Sea Link was built. What damage a ship like MV Wisdom could cause if it rammed into the Sea Link does not require much imagination. Providing BRTS would also help significantly in averting annual fatality of 4,000 persons on the suburban railway system in Mumbai that happens mainly due to overcrowding.
Do you not want to voice your concern on the priority that the government is giving to projects that will take a long time, cost a lot, serve very few, and would not be of much use in an emergency?
[Sudhir Badami is a civil engineer and transportation analyst. He is on the Government of Maharashtra's Steering Committee on Bus Rapid Transit System (BRTS) for Mumbai and the Mumbai Metropolitan Region Development Authority's (MMRDA) technical advisory committee on BRTS for Mumbai. He is also member of the Research & MIS Committee of Unified Mumbai Metropolitan Transport Authority (UMMTA). He was a member of the Bombay High Court-appointed erstwhile Road Monitoring Committee (2006-07). He has been an active campaigner against noise pollution for over a decade and he is a strong believer in a functioning democracy. He can be contacted on email at email@example.com.]
The protests are not going to end any time soon as the noted social activists, including Swami Agnivesh and Narmada Bachao Andolan leader Medha Patkar, are now lending their support to the agitators
Mumbai: Exactly six years after Korean steel giant Posco signed a memorandum of understanding (MoU) with the Orissa government for its Rs52,000-crore 12 million tonne per annum (MTPA) project, the mega venture remains mired in uncertainty, reports PTI.
As the anti-steel plant agitation gains momentum, both Posco and the Orissa government have vowed to push ahead with the project in Jagatsinghpur district.
The country’s biggest single foreign direct investment (FDI) project till date has been beset by stiff protests from local communities against land acquisition. As if that was not enough, Posco’s MoU with the state government is get to lapse.
Despite obtaining a green clearance from the Union environment ministry, the project remains grounded in view of large-scale protests against land acquisition.
“We are committed to the Orissa project. We are hopeful and very optimistic about the plant,” Posco India vice-president Vikas Sharan told PTI over the phone.
On renewing the MoU, Mr Sharan said, “You have to ask the Orissa government on this matter.”
The MoU for the project was inked with the Orissa government on 22 June 2005 but no headway has been made since then.
The Pohang-headquartered steel major was to build a 3-million tonnes capacity steel plant, blast furnace or finex route during the first phase in Paradeep between 2007 and 2010 and expand the final production volume to 12 million tonnes.
The entire project requires 4,004 acres of land.
Posco will now have to sign a fresh MoU and though the Naveen Patnaik government has an investor-friendly image, it remains to be seen how proactive the state government is in the present circumstances when protests are at their peak.
“We are very optimistic over the Korean project. A committee is examining the issue of renewing the MoU after the environmental clearance,” Orissa steel and mines minister Raghunath Mohanty said.
“Protest is a common phenomenon. Besides, Posco is the biggest single FDI venture in our country. We are always ready to face any kind of pressure for the benefit of local communities as well the state,” he maintained.
The environment ministry last month gave its final clearance to the 12-million tonne plant with certain conditions, including ensuring that tribal rights and forest protection laws are observed.
The protests are not going to end any time soon as the noted social activists, including Swami Agnivesh and Narmada Bachao Andolan leader Medha Patkar, are now lending their support to the agitators.
“What is happening at the proposed project site is completely illegal. The land acquisition should happen only after proper dialogue with the local communities,” said Ms Patkar, a veteran of many a protest.
Accusing the chief minister of adopting a callous attitude towards local community, Ms Patkar asked, “Why can’t Naveen come down to Dhinkia for the people while he rushes to Delhi for talks with the South Korean president for the Posco project.”
“Why are you using the police to beat up villagers for a foreign company? Is not it illegal to acquire land of farmers without their consent? The state government and the Centre have no right to acquire land at gunpoint,” Ms Patkar said.
Meanwhile, Posco Pratirodh Sangram Samiti (PPSS) president Prashant Paikary said, “This battle will continue till our last breath.”