Govt ignores cement sector's need for coal

The cement sector seems to be getting a raw deal every time coal blocks are allotted by the government.

Of the 160 coal blocks already allotted by the government to various industries, the cement sector has failed to bag even one. This month, too, the sector drew a blank as 38 coal blocks are being allotted.

This is especially troubling for the sector as its coal requirement is set to double. Industry players are planning to pump in over Rs 50,000 crore to increase capacities by over 100 million tonnes in the current Five Year Plan (2007-12). The current capacity of the industry is 175 million tonnes. Industry experts said that open market and imports will be the only way out for the cement companies.

The chairman and managing director of a leading cement company, who refused to be identified, said, "Past experiences have not been good for us as blocks were allocated to very small steel firms and even to those power companies, which were not existing. The government asked us about the rationale and raised questions on the coal requirement of cement firms," he said.

"There are several companies which got blocks despite the fact that their coal requirement was far less than the cement companies," he added.

Players blamed the poor coordination among the concerned ministries and said that the policy was not clear on the issue. They agreed that all sectors were important and stressed the need for a level playing field, but cautioned that the cement industry could not be ignored.

Managing director of a east India-based cement company said one of the reasons why industry was not able to grab coal blocks was its less requirement of coal. "On an average, a cement plant with a capacity of one million tonnes requires 0.25 million tonnes of coal," he said.

Bemoaning the government's move, the chief executive officer of a south India-based cement firm said, "The government is giving blocks to power and fertiliser industries, which are subsidised and keeping cement industry at the bottom. This is tantamount to discrimination."

"On the one hand, the government keeps pressing for cuts in cement price and on the other is least concerned with the problems the industry faces," he added. The company is keeping its fingers crossed on coal blocks. According to analysts, power sector has taken away the sheen from the cement industry. Chances of any positive news this time seems unlikely, they added.

Moreover, the supply through linkages is also not fully met. The industry, which is liable to meet 80 per cent of its total coal requirement through linkages, gets less than 65 per cent. The rest is being sourced from e-auction and imports. On an average, the disparity between coal prices from linkages and open market is around Rs 800-1000 a tonne.