BY THE WAY: India’s Cement Mystery and Affordable Housing
Noour Ali Zehgeer
India’s cement pricing paradox has a bitter twist: despite the landmark GST reduction from 28% to 18% in September 2025, a reform that should have delivered ₹30-40 relief per bag—cement prices remain stubbornly elevated at ₹334 per 50kg bag as of December 2025. That’s 67% above the pre-pandemic baseline of ₹200.
Walk into any construction site from Mumbai to Madhya Pradesh and the complaint is universal: cement costs are crushing project economics. Homebuilders, affordable housing developers, infrastructure giants, all face the same brutal math. Material costs that refuse to normalize despite overcapacity, declining input prices, and historic government tax relief. Here’s what makes this paradox particularly bewildering: India is the world’s second-largest cement producer with 639 million tons of installed capacity, yet operates at only 67% utilization. Coal prices moderated, pet-coke stabilized, and the government delivered a massive 10-percentage-point GST cut. Yet cement costs 67% more than five years ago. The numbers simply don’t add up.
The India-China Consumption Chasm: Understanding the 5X Gap
To grasp India’s cement pricing crisis, start with one foundational statistic: India’s per capita cement consumption stands at 290 kg versus China’s 1,440 kg, nearly five times lower. This isn’t a trivial difference. It’s a structural divergence revealing everything about India’s infrastructure deficit, urbanization gap, and construction constraints.
China, accounting for 48% of global cement production, achieved its consumption levels through three decades of intensive infrastructure build-out. India, with 35% urbanization versus China’s 65%, operates in fundamentally different terrain. Our cities are less dense, our infrastructure less developed, our construction methods more labour-intensive and less cement-intensive.
The global average per capita consumption hovers around 470-520 kg. India doesn’t just lag China, it lags global norms significantly. This consumption gap represents India’s massive growth runway. But here’s the catch: elevated cement prices threaten to constrain the very consumption growth India desperately needs to close this infrastructure deficit.
“India’s 5X consumption gap with China isn’t weakness, it’s potential. But potential means nothing if pricing dynamics prevent take-off.”
December 2025: ₹334 and the GST Benefit That Vanished
According to JM Financials’ December 2025 channel checks, pan-India cement prices settled at ₹334 per bag, representing a marginal ₹2 decline from November. This modest reduction comes months after September 2025’s historic GST cut from 28% to 18%, a policy intervention that should have delivered immediate, substantial consumer relief.
The mathematics are straightforward: a 10-percentage-point GST reduction on a ₹350 pre-reform bag should have lowered retail prices by approximately ₹30-40. Initial market response showed promise, OPC prices dropped 8%, PPC fell 11%. Manufacturers like Vicat and Shree Cement publicly committed to passing complete benefits to customers.
Why India consumes 5X less cement per capita than China, yet pays persistent premiums despite GST relief from 28% to 18%.
Yet by December 2025, prices at ₹334 reflect only modest declines from pre-GST cut levels, nowhere near the ₹30-40 reduction the tax change mathematically delivered. Where did the GST benefit go? Manufacturers absorbed much of it into improved margins rather than passing it proportionally to construction sector customers.
ICRA projected that operating margins would increase 12-18% to around ₹860 per ton in FY2026, confirming that producers chose margin restoration over aggressive price competition. India’s regional cement market structure—concentrated geographically despite national fragmentation, enables this pricing discipline that benefits manufacturers more than construction consumers.
The Overcapacity Paradox: 33% Idle Capacity, Premium Prices
India’s cement industry operates at roughly 67% capacity utilization, 639 million tons installed, approximately 427 million tons consumed. Economic theory suggests massive overcapacity should trigger intense price competition driving prices toward marginal cost. Yet ₹334 pricing persists, 67% above pre-pandemic levels. Why?
Regional supply-demand imbalances create the first distortion. While aggregate national capacity exceeds demand, specific markets face constraints. Southern states experienced capacity tightness in 2024-2025, enabling price increases even as national capacity sat idle. Cement’s economics, heavy, low-value-to-weight, uneconomical to transport beyond 300-400 km, create regional oligopolies where 3-4 manufacturers dominate specific geographies.
The industry’s capacity expansion race compounds the paradox. Between 2024-2025, the market added 70-75 million tons of new capacity. Between 2026-2030, an estimated 200-250 million tons of additional grinding capacity is expected, requiring investment exceeding ₹1.6 lakh crore. UltraTech Cement alone plans ₹32,400 crores in capacity additions over three years.
This creates classic prisoner’s dilemma dynamics: each manufacturer expands to protect market share, yet collective expansion depresses utilization further. The result? A market structure where overcapacity coexists with regional pricing power and discipline that prevents the competitive price war overcapacity theoretically should trigger.
Conclusion: The ₹134 Question India Must Answer
India’s cement price paradox, ₹334 per bag in December 2025, 67% above pre-pandemic despite GST relief and massive overcapacity, crystallizes the gap between construction ambitions and material cost reality. The ₹3.6 lakh crore cement market sits at the nexus of affordable housing imperatives, infrastructure delivery, and economic competitiveness.
(STRAIGHT TALK COMMUNICATIONS EXCLUSIVE)
