Andhra's mini-cement plants show 14.2% growth in despatches

The mini-cement plants in Andhra Pradesh recorded a growth of 14.23 per cent in despatches during the financial year 2003-04.

The despatches inclusive of supplies to other states were 19,58,000 tonnes during 2003-03 and 17,14,000 tonnes in 2002-03. The outside Andhra Pradesh (OAP) supplies went up by one lakh tonnes to three lakh tonnes in 2003-04.

Of the 30 mini-cement plants located in Andhra Pradesh, only 11 operated during the year ended March 31, 2004. The total capacity of operating units is around 2.9 million tonnes.

Of these units eight are rotary technology-based units, while the remaining three utilise vertical shaft kiln (VSK) technology. Rotary plants require coal as fuel whereas VSK plants use coke dust or coke breeze as fuel.

As per the Cement Control Order 1967, a mini cement plant means a cement plant consisting of one or more kilns and having a total installed capacity of not exceeding 200 tonnes per day or 66,000 tonnes per annum.

However, the central government, recognising that small capacities were unviable, permitted the existing units to expand capacities up to 900 tonnes per day in 1999.

They are given concession in excise duty due to their economic benefits for the rural areas. They pay an excise duty of Rs 250 per tonne up to 99,000 tonnes and Rs 400 per tonne for higher production.

Explaining the causes for closure of 19 mini-cement plants in Andhra Pradesh, which include two rotary plants, the industry sources said that the cost of cement manufactured in a mini-cement plant was higher by around Rs 400 at Rs 1,200 per tonne as compared to the per tonne cost of Rs 800 for a large cement plant.

The price realisation per tonne is also lower by Rs 100-140 in the case of rotary plants and Rs 200-240 in the case of VSK units. A 50-kg bag of a mini unit is sold lower by Rs 7-8 in the case of rotary plants and Rs 10-12 in the case of VSK units. Twenty bags make up a tonne.

The average fuel consumption is mini plants is around 900-1,050 kilo calories per kg as compared to 700-800 kilo calories in large plants. For VSK plants, the cost of coke breeze and its transportation from steel plants had ballooned over the years.

The price of coke breeze, which was around Rs 300 per tonne in the late eighties, had shot up to Rs 2,500 per tonne at present. Add to these is increase in the cost of power, royalties and other miscellaneous input materials, the sources pointed out.

The intense price wars and reluctance of banks and financial institutions to fund the working capital requirements were also cited as the major factors which spelt trouble for the mini-cement industry. The mini-cement industry is pinning hopes on the new governments at the centre and the state to come to their rescue.

If there is one heartening factor for the mini units it is the changing market dynamics of the cement industry itself. Increasing diversion of cement supplies by the companies in Maharashtra from Andhra Pradesh to the northern states like Bihar and Uttar Pradesh augurs well for the industry in Andhra Pradesh.

The units in Madhya Pradesh and Orissa have already practically ceased selling cement in Andhra Pradesh, the sources pointed out.

Speaking of the increasing demand in north India, the sources said the consumption in that region during 2003-04 was 83 million tonnes. The region has an installed capacity of 94.10 million tonnes. If one takes into consideration closed and inoperative capacities into consideration, demand-supply gap seems to have been bridged.

With no new additional capacities in the offing, the north and the north-eastern regions have become attractive for other regions. During demand periods, price per bag reaches a peak of Rs 185 in the northern states and Rs 225 in the north-eastern region.

The situation is so attractive that four companies in Andhra Pradesh "� Priya Cements, Penna Cements, Orient Cements and Kesoram Cements "� are supplying cement to the northern region in view of the demand, the sources pointed out.

The supplies from other states into Andhra Pradesh were at 1.4 million tonnes in 2003-04 up from 1.2 million tonnes in the year before.

The rise in supplies was attributed to the expanded capacities of ACC and Gujarat Ambuja units in Maharashtra. The industry sources expect that the supplies from other states to fall to around one million tonnes in the current financial year.