 "Cement industry to gain from Telangana: Experts")
Senior representatives from Cement companies have said that they don't see any operational problem arising out of the split, however only thing which worries them is that they may have to go for fresh registration for sales tax and other purposes. The combined capacity of various cement manufacturers in the state is around 80 million tonne.
They added that the cement industry stands to gain in case the new State decides to woo the investors will bring in fresh incentives on new investments and expansions and also take up more infra projects, housing and urban development.
More From This Section
A recent report stated that cement consumption has fallen over by about four% to 1.6 million tonnes per month in Andhra Pradesh due to political uncertainty and a delay in projects across sectors. Major cement plants in the state were running at less than 50% capacity because the installed capacity was more than doubled in the last five-six years, when local consumption fell.
The formation of a new state is expected to provide a fresh impetus for demand growth for cement consumption in Coastal Andhra. Estimate is that a new capital alone could cost anywhere between Rs 50,000 crore and Rs 1 lakh crore including setting up a High Court, a legislative assembly, a secretariat and housing facilities for government employees.
“We are watching the situation. As such, there is poor industrial growth, when it picks up the demand for cement will also pick up in the undivided Andhra Pradesh,” said one of the senior officials from a cement company based in Chennai.
N Srinivasan, vice chairman and managing director of India Cements Ltd agreed and said lot of money will be spent in Telangana, which will increase the demand for cement. Besides he also noted, the region has rich natural resources.
He added, “it is true that Andhra Pradesh slowed down considerably. There is a lot of agitation because of Telangana. One has to see how well things will settle down. Definitely sales are being affected and it could have an effect on this quarter, but we are hopeful things will resolve down soon”.
It may be noted, South India's largest cement company India Cements, will have two plants in each of the States, after the split. The plants in the proposed Telengana state will have more capacity. The plants in Andhra Pradesh – Chilamkumar, Cuddapah district with a capacity of 1.46 million tonnes and Yerraguntala, cuddapah district with a capacity of 0.73 million tonnes. Plants in Telengana are at Vishnupuram, Nalgonda district capacity 2.5 million tonnes and Malkapur, Ranga Reddy district with a capacity of 2.4 million tonnes.
Another official noted, Telangana region has also got rich natural resources. About 45% of the forest area in Andhra Pradesh state is in Telangana region while 20% of the country's coal deposits in the country are also found here. Telangana is also rich in limestone deposits that cater to cement factories.
The region does not have Mica deposits. Besides, as per the current proposal, a new capital will be built for Andhra as Hyderabad will continue to be the capital of Telangana.
He added, cut throat competition among the players have depressed the price realisation. Also, the power holiday has crippled their working.
Recently announcing first quarter results Srinivasan said that average net realisation during the quarter was lower by 10% at Rs 3,185 per tonne as against Rs 3,550 per tonne resulting in a topline loss of Rs 97 crore, which was the primary reasons for the reduction in EBIDTA.
The industry also worried over the agitation against the bifurcation which if continued will affect the movement of materials and finished goods.
Andhra Pradesh is one of the largest cement producing States in the country with copious limestone deposits that can last for several years. Almost all the leading players except Chettinad cement have their plants in Andhra Pradesh. There are about 46 plants including some small plants and their capacity comes to 80 million tonnes of the total all India capacity of 325 million tonnes.