Coal news and updates

Is govt laying out ‘concrete road’ map to ease cement woes?

September 22: The Indian cement industry, which had been passing through a difficult phase due to higher than required production capacity that led to low capacity utilisation in recent years, may have something to cheer about in the coming days.

The newly elected NDA government is believed to be working on a formula to convert all roads in the country to concrete as part of its initiative to improve infrastructure and also provide some comfort to the cement sector.

Incidentally, the apex body of cement makers, Cement Manufactures Association (CMA), had long been demanding that India should look at complete concretisation of its roads to bring down maintenance costs and, in general, improve the quality of roads in the country.

According to an official from a cement-making company, the suggestions of CMA appear to have found takers in the government as the Ministry of Road Transport and Highways is believed to be working on a plan wherein it aims to procure cement from plants at an ex-work price of around Rs 160 per bag for the project.

Though the final price is still being negotiated, it is expected that if the proposal goes through, Indian cement companies stand to benefit immensely as the overall capacity utilisation of the sector will increase significantly and the country too stands to benefit to a large extent in terms of improvement in road infrastructure at a comparatively lower cost of cement, industry sources said.

According to sources, Nitin Gadkari, the Minister of Road Transport and Highways, has come up with a plan on a long-waited programme of converting all roads in India to concrete, which is expected to utilise up to 30% of the current cement production capacity in India.

Sources feel some of the cement-makers in India may be willing to supply cement to government projects on variable cost basis in order to be able to operate at higher capacity utilisation.

If this happens, the cement industry might be able to supply around 30% of its total production towards government projects, which can make things easier for it because then it will have to focus on selling the balance 70% of its production to non-government consumers.

“If there is 30% excess cement production capacity in the country and it is not getting utilised, then it is basically a loss to the nation and if this surplus capacity can be utilised for a better cause, even at on cost basis, it is worth it,” a cement company official said.

According to information available with ICMW, the government is believed to be working on a formula wherein companies will supply cement to government’s infrastructure and road projects at Rs 160 per bag ex-works basis.

“This price of Rs 160 per bag may not be final, but a mechanism needs to be worked out so that the cement industry is able to operate at full capacity and the country is also benefitted,” a second official said.

He pointed out that 5-6 cement-makers have already submitted their offers to the government and a mechanism is likely to be announced soon.

“It could be like this... wherever there is a developmental project, the government will buy the material from the nearest cement plant. So it is advantageous to the government as well as industry as both stand to benefit on logistical reasons,” said a third official.