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Impact of Coronavirus on Indian Brick Industry: Part I

Sameer Maithel | Sunday 5 April 2020

Brick production season in most parts of India is usually of 6-7 months, starting in November/December and ending with the arrival of the monsoon in May/June. The Coronavirus crisis has hit right in the middle of the brick production season and at a time when the brick industry was already struggling with slowing demand, closure due to air pollution during winter months, production loss in northern states due to frequent rains, etc. Information received from Punjab, Haryana, UP, Bihar and West Bengal indicates that most of the brick kilns are operational during the lockdown period. However, many brick kilns are facing problems due to shortage of coal, shortage of cash to pay the wages and buy raw materials. In this article, we would be assessing the potential impact on the demand of bricks during the rest of 2020.

A new report by Anarock Property Consultants Pvt Ltd, titled “Covid 19 Impact on the Indian Real Estate sector”, provides a good assessment of likely impact on organized real estate industry located in urban centers. The report was published a few days ago. We will focus on the assessment for the residential construction which is the largest consumer of bricks in the country. Some of the key observations and conclusions of the report are:

1. Due to Coronavirus lockdown, the sales of the new flats have come to a complete halt due to restrictions on physical site visits, meetings, documentation and registration, etc. This may continue for some more time and will severely impact the cash flows of the builders.
2. The supply chain of the construction materials (cement, steel, bricks, etc.) has been badly impacted and a part of the construction work force consisting of migrant workers have gone back to their villages. It may take several weeks and months before the supply chain is restored and workers come back.
3. During last few years almost 40% of the new residential project launches in the top 7 cities of India is in the affordable housing segment. The home buyers of this segment are mostly lower income group families, which are likely to be the most affected segment of the working population. This segment has limited income and are involved in jobs/businesses, where work from home is not an option, thus this segment will incur loss in income and several families may be forced to postpone their decision to own the house.

Overall, the report estimates that in the year 2020, the residential sales are likely to register an annual decline of around 25-35%. In addition, the launches of new residential projects during 2020 is set to decline by 25-30 %, thus impacting the demand for bricks in 2021 also.

In India, small towns and rural areas account for more than 50% of the brick sales, so it is important to look at the situation there also. The economy of these areas primarily depends on agriculture. This is the Rabi harvesting season in Northern India. Labour which is essential for harvesting as well as for the operation of mandis is in short supply. Newspaper reports indicate that many mandis are also not working and despite permissions, movement of trucks and combine harvesters is restricted.  Delay in harvesting mean a lower yield, exposing the crop to sun and rain, besides leaving a smaller time frame for preparing the field for the kharif crop. Similarly, the revenue of horticulture and vegetable farmers are also hit due to logistics issues. Overall, the farmers throughout the country are expected to incur loss in income, this in turn is likely to delay construction in rural areas, some believe till the end of the rainy season.

Thus, it seems that the Coronavirus will result in significant reduction in brick demand during 2020 in both urban and rural areas and the brick industry should start looking at ways to survive through the crisis and come out stronger from the crisis.  Two steps which come to my mind are:

• Implementing measures to reduce the cost of production, wastages of all kind (fuel, clay, poor quality bricks, etc.) and improving productivity. Adoption and proper operation of zig-zag kiln technology is an example to reduce wastages, but there can be other simple technologies and measures that can be adopted. Conversion to zig-zag kiln technology results in around 20-25% savings in fuel and the percentage of class-I brick production can be increased to 80-90%. A lot of brick kilns in recent years have adopted zig-zag technology but many are not operating it properly. Training workers and implementing proper operation practices in zig-zag kiln technology should be a priority at this point of time. Brickguru has a lot of information on this and would be adding new information in the coming weeks.
• The brick industry, which is a major employment generator in the country, should quickly organize itself and present its case for receiving support from the state and central governments, such as:
  • Assuring unhindered supply of coal,
  • Utilizing funds under the skill mission for the training of brick kiln workers,
  • Facilitating loans from banks for technology upgradation,
  • Simplifying and streamlining environmental and mining rules and regulations,
  • Removing restrictions on the procurement of clay bricks for the government projects, etc.

We would like to hear from you, about How Coronavirus has impacted brick industry in your area? What innovative measures are you taking to reduce the cost of production, wastage and improve productivity? What kind of help would you request from the Government ?  Please WhatsApp your response at 9711153307 or send an email at mail@brickguru.in by April 12^th, we will publish selected responses in our next blogs.

Sameer Maithel

The writer is the Director of
Greentech Knowledge Solutions Pvt. Ltd. New Delhi