Truckload of worries for cement industry in Gujarat

The cement industry in Gujarat is trying to come to terms with the increase in freight charges following the Supreme Court ban on overloading as the prices in cement are ready to take a further leap.

The cement charges have shot up by Rs 5-10 per bag containing 50 kgs after the ban. Although most of the cement companies are opting for rail transport, they still heavily bank on trucks due to increasing demand of cement.

According to a senior executive of Gujarat Ambuja Cement Ltd, "We produce nearly 4000 metric tonnes of cement daily of which we transport approximately 1200-1500 tonnes. We are left in a lurch owing to shortage of trucks as our factory stands cornered in Kodinar. Also, there is also no rail facility here."

The prices of Ambuja cement have been hiked by Rs 5 in the past one month and it is further likely to rise by another Rs 10, the official maintained while adding that the dispatches have grown by seven per cent to almost 1.2 million tonnes since past one month.

Cement is a low cost material hence the transportation freight and the raw materials including clay, limestone and gypsum also have to be transported to the factory which has led to an added increase in transportation prices, according to sources in the industry. "The freight cost has increased to Rs 5-6 per bag depending on the distance and there is a sudden demand for trucks," said R D Rathi, director and CFO of Ultratech cement. The price of Ultratech cement was Rs 146 per bag in October which has been increased to Rs 155 in Ahmedabad to make up for the increase in transportation cost, according to a source. The prices of cement in central and south Gujarat have touched Rs 180- 190 in the past few days due to shortage in supply and is likely to touch Rs 200 according to industry sources.

Earlier companies used to carry double the capacity of cement hence the transportation cost has nearly doubled for them now, sources further revealed.

A top official of Sanghi Cement admitted that the price of cement has gone up by Rs10 per bag due to imposition of ban on overloading of trucks said the freight cost has gone high by almost 45 per cent. "We are moving cement by rail and sea in Gujarat to mitigate the problem of shortage of trucks," he maintained.

The 10 Wheeler Double XL truck can carry 17 tonnes of cement and the companies used to overload it to 30 tonnes whereas for 6 wheeler single XL the loading capacity was 9 tonnes which used to be overloaded to 15-18 tonnes before the SC ruling.

Kamal Modi of CTA Logistics, the largest multi model transporter of western region said, "Earlier cement was never transported by train. It was exported to states like Punjab, Hariyana, Delhi and UP in trucks that were heavily overloaded." The freight charges from Kodinar to Ahmedabad was about Rs 450 which has today increased to Rs 630.

The freight rates have gone up by nearly 35 per cent, he added.

"This move by the Supreme Court is a welcome respite for truck owners," he said. and added that the demand for trucks has doubled.

The companies are also opting for 40 wagon open rakes as they carry 3700 tonnes per wagon as compared to covered ones that can intake only 2500 tonnes, Modi further said.

"The market is witnessing a major demand supply gap. With Ahmedabad declared a mega city, there is a huge demand of cement for construction. Our raw material comes from Rajasthan and there is a problem of rail connectivity."

The RTO is also very strict to ensure that there is no overloading and the goods that have been passed adhere to the norms or not, he said. "We find it very difficult to supply the demand in Ahmedabad as there is shortage of trucks," said Ramesh Prasad, marketing manager of JK Cement.

The cost of JK Cement was Rs 150 per bag two months ago which has risen to Rs 160 and another rise of Rs 10 is expected in near future.

There is a demand supply gap of nearly 40 per cent and cement companies are trying to shed the burden on contractors by urging them to come and collect the cement from company godowns, said a major cement player.