Overview on

The Indian Cement Sector

and
its Changing Coal Requirements

By
N.A. Viswanathan
Secretary General
CEMENT MANUFACTURERS’ ASSOCIATION
 FROM MODERATE TO WORLD CLASS
INDIAN CEMENT INDUSTRY

India in Globe
 Second Largest Cement Producer in the
World, after China.
 State-of-Art Cement Technology.
 Low Energy Consumption.
 Produces Cement comparable to World
Standards.
 Green and Environment-Friendly Industry.
 Contributes significantly to CO2 emission
reduction and thereby taking care of issues
concerning Global Warming.
 Per Capita Cement Consumption at 202 kg is
very low against World Average of 513 kg.

Industry’s Initiatives and Achievements acknowledged and appreciated world over

- although, a lot still remains to be done with the help and support from Government

1
 BURGEONING GROWTH
INDIAN CEMENT INDUSTRY

 1982 – A ‘Watershed’ in the

history of Indian Cement 1600

Industry when ‘Partial 1400 Capacity

811.4
1200 Production
Decontrol’ was introduced 1000
culminated to Decontrol in

323.20
Mt.
800

479.3
209.20
1989. 600

105.68

710
33.51
 Drastically compressed 400

407.4
23.30

228.30
174.31
0.01
0.01

76.22
200
time for adding additional
0
100 Mt. cement capacity 1914-15 82-83 96-97 07-08 10-11 2016 2022
(Tar.) (Est.)
mark to 11 and 3 years
respectively from 83 years
taken for the First.
 India Produces 7% of Global Cement Production.
 Of late, subdued cement demand has significantly lowered capacity
utilization – A major cause of concern.
2
 GREEN AND ENVIRONMENT-FRIENDLY
INDIAN CEMENT INDUSTRY

 Adopts Latest Technologies to keep it

globally competitive in respect of :
 Production Cost (However, high taxation
and import of inputs negate it).
 Protection of Environment in and around
cement plants.
 Strives significantly for maintaining our
Ecological balance being disturbed through
Global Warming.
 Takes notable initiatives and measures for
Clean Development Mechanism through
increased clinker substitution and
Alternative Fuels use.

Still a Lot of Scope for Further Improvement

3
 TOWARDS TECHNOLOGY & ENERGY EFFICIENCY
INDIAN CEMENT INDUSTRY

 Proactive Cement Industry constantly improves Energy Consumption.

 Some plants have become global benchmarks in energy consumption, next to Japan.

Year
1950-60 1970 1980 1990 Post 2010
Kiln Capacity 300 - 600 600 – 1200 2400 – 3000 3300 – 6000 4500 – 12000
(Tonnes/Day)
Heat Consumption 1300 - 1600 900 – 1000 800 – 900 650 – 750 650 – 750
(Kwh/Tonne Clinker)
Power Consumption 115 - 130 110 - 125 105 - 115 95 - 106 70 - 90
(Kwh/Tonne Cement)

 99% Energy Efficient Dry

Process plants.

4
 NEW INITIATIVES FOR ENERGY EFFICIENCY
INDIAN CEMENT INDUSTRY

 Perform, Achieve and Trade

(PAT) Scheme of BEE @

 Alternate Fuel and Raw

Material (AFR)

 Waste Heat Recovery

(WHR) through Co-
generation

@
Outlined under the National Action Plan on Climate Change released by
Hon’ble Prime Minister of India in June 2008.

Energy consumption likely to be reduced further by 4.8% in first cycle of PAT

Scheme, ending in 2015

5
 APPRECIABLE REDUCTION IN CARBON FOOTPRINT
INDIAN CEMENT INDUSTRY

 By adopting best available Technologies and Environmental practices in the

plants viz. Waste Heat Recovery Power Projects and Uses of Alternate Fuels -
Pet coke, Lignite, Husk, Municipal Wastes, Biomass, etc.
 CO2 emission level reduced from 1.12 tonne of per tonne cement produced
in 1996 to 0.719 tonne CO2 emission for one tonne of cement in 2010.
 Is on the top in Certified Emission Reductions Projects registered with the
Clean Development Mechanism (CDM) of Kyoto Protocol.
 Indian roadmap now outlines a low-carbon growth pathway for the Indian
cement industry that could lead to carbon intensity reductions of 45 per cent by
2050.

 These reductions could come

from increased clinker
substitution and alternative fuel
use; Improvements to energy
efficiency, and the development
and widespread implementation
of newer technologies.

6
CONSCIOUS OF ENVIRONMENTAL HEALTH AND SAFETY
INDIAN CEMENT INDUSTRY
Eco-friendly use of hazardous industrial wastes
by focusing and producing Green Cement.
PBFS, Others,
PBFS, 11.0 Others, 0.
6.87 0.25 OPC, OPC, 62.0
5 75
31.62 2
OPC PPC, 26.1
8 PPC
OPC
PPC

PPC,
61.19 2010-11 2000-01

PBFS, 10.4 Others, 0.

59 OPC, 69.6
PPC, 19.4 8
1 PPC

OPC

1990-91

 Consumes around 27% of Fly Ash generated from

Thermal Power Plants.
 Consumes almost 100% Slag generated by Steel Plants.

7
 TAKES MEASURES FOR ENVIRONMENT PROTECTION BEYOND ITS
SURROUNDINGS
INDIAN CEMENT INDUSTRY
 Promotes Environment-Friendly Cement Bitumen Road
Concrete Roads and White Topping in place
of Bitumen Roads, in which significant
emission of particulate matter, sulphur
dioxide are emitted through
Hot-Mix plants while preparing bitumen mixes
at construction sites.

Cement Road
 Prolongs life of quarries and mines as
Cement Roads consume less
aggregates.
 Protects ambient temperature from
increasing due to reduced absorption
of heat .
 Utilizes fly ash upto 35%, disposal of which is a nuisance and health hazard.
 Conserves 10% electricity used for street light
 Conserves 14% Diesel and Petrol for Trucks plying on Cement Concrete Roads.

8
 CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES
INDIAN CEMENT INDUSTRY

 Developed green belts around

cement plants through social
forestry

 Quarried mines converted into

water bodies, reservoirs, etc.

 Provide clean environment, health

care and education facilities to
workers and surrounding populace.
 Adopted more than 700
neighbourhood villages surrounding
plants.
– Basic education, Primary Healthcare, Water
supply ensured.
– 225 Primary and Secondary Schools
established.
Water Conservation
 25 Colleges financed.

9
 CLEAN ENVIRONMENT AND SOCIAL COMMITMENT
INDIAN CEMENT INDUSTRY

Mined out areas converted into lakes by

cement plants. SIBERIAN Birds certify Our
Greenery Around Cement Plant eco-friendliness

Thick rows of trees at a cement plant’s

perimeter Bulwark against GHG Rain water harvesting in Limestone Mining pits

10
 MAJOR CONCERNS

 Updation of Database a casualty

 Logistics, Despatches, etc. plans severely impacted after CCI’s
Order of 20th June 2012
 Dropping Capacity Utilisation (from 90% to 70% now)
– Sluggish Demand
 Coal Conundrum
 Increasing Input Costs – Coal, Slag, Pet Coke, etc.
 High Taxes and Levies
 High interest rates making difficult for manufacturers to put up
new capacities as well as construction industries to fund their
new projects

TODAY FOCUSING ONLY ON COAL SCENARIO

11
 Status of Indian Coal

 India is the third largest coal

producer.
 It has fifth largest coal reserves
 Total reserves - 293 billion tonnes
(as on 01.04.2012) - Including Proved
reserves up to the depth of 1200 m -
China
118.14 billion tonnes (as per USA
Geological survey of India)
 it is not able to meet domestic
demand.
 India is likely to become the
second largest importer of coal
next to Japan.

12
 Breakup of Coal Demand by the User
Industries

Power Utilities &

Captive Power Utilities

7% Steel and Sponge

72%

Power 5%
Cement

Chemical, Textiles,
16%
Fertilizer and E-auction
& others

It is ironical, cement which is equally as important as

power for growth of country’s economy gets only
1.75% of its 5% requirement of coal production

13
 Domestic Coal Production and Demand
(Fig in MT)

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2016-17

CIL 379.46 403.74 431.26 431.32 435.84 452.0 615

SCCL 40.60 44.54 50.43 51.33 52.21 56.00 57.00

Captive 21.17 29.87 35.03 34.60 36.24 32.00 100.00

Others 15.77 14.61 16.28 14.82 15.50 18.00 23.00

Total 457.00 492.76 533.00 532.07 539.79 558.00 795.00

Production

Demand 504.29 549.03 582.25 624.78 649.87 772.84 980.50

Gap 47.29 56.27 49.25 92.71 110.08 198.44 185.55

Mammoth mismatch – coal imports increasing significantly

14
Cement Sector - Third Largest
Consumer of Coal /Fuel
 Coal is used as the main fuel in the industry.

 Coal is supplied to cement companies on the basis of

Fuel Supply Agreement (FSA) between Coal
Companies and Cement Companies, at a 35% higher
price than the Regulated Sector (G6 to G17 – The
grades preferred by Cement Industry) of power grade
coal, consisting of Power, Fertilizer and Defence.

 Coalavailability to the industry dropped to 35% in

2012 from 75% in 2003.

15
 Steep Declining Trends in Coal Supply to
Cement Industry
Shrinking Coal Availability
80
80
75% Linkage coal imported coal pet coke
70 Linkage coal imported coal pet coke
70
60
60
50
50
35%
35%
40
40
30
30
31%
20 32%
20
10
10 17%
16%
0
0
FY 03 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12 FY13
FY 03 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12
Data based on CMA member companies

Source: CMA Data of Member Companies

 Coal supply through linkages steeply dropped to 35% in FY13, compared to 75% in FY03.
 No coal linkage to new capacities/expansions.
 Open market./import of coal enhances its cost by 60 to 80%.

Usage of AFR and WHR by cement industry become inevitable to meet Growing
Cement Production Target
16
 Procurement of Fuel by Members of CMA
Fig. in MT
Linked Imported Coal Pet Lignite Total Fuel % of linked
Year Coal coal procured coke & procurem coal against
from Other ent Total
open Fuel procurement
market

2002-03 13.34 3.66 0.77 1.04 0.05 17.87 75

2003-04 13.35 3.18 1.03 1.41 0.11 19.08 70
2004-05 14.84 3.63 1.27 1.87 0.76 22.37 66
2005-06 14.81 3.40 1.55 2.16 0.82 22.74 65
2006-07 14.43 4.96 2.94 2.09 0.83 25.25 57
2007-08 14.56 6.08 5.00 2.27 0.93 28.84 50
2008-09 14.29 6.97 6.17 2.41 0.36 30.20 47
2009-10 10.79 6.95 4.36 3.92 0.23 26.25 41
2010-11 11.90 8.48 4.92 3.18 0.36 28.84 41
2011-12 10.45 9.39 4.51 4.70 0.75 29.80 35
2012-13 10.38 9.27 3.93 5.18 1.06 29.82 35
17
 ESTIMATED CEMENT DEMAND PROJECTIONS
FOR THE 12TH PLAN
BY WORKING GROUP OF PLANNING COMMISSION

High Scenario (Mn.t.)

Year Cement Cement
Capacity Production

2011-12 336.1 246.7

2012-13 349.6 272.0

2013-14 374.9 299.9

2014-15 405.1 332.1

2015-16 440.6 367.8

2016-17 479.3 407.4

2021-22 811.4 710.0

2026-27 1379.9 1237.4

18
 COAL REQUIREMENT TO MEET
CEMENT DEMAND PROJECTIONS
(Mn.t.)
Year Cement Coal Requirement
Production Cement CPP Total
Production *
2011-12 246.7 41.8 16.2 58.0
2012-13 272.0 46.2 17.8 64.0
2013-14 299.9 51.2 19.6 70.8
2014-15 332.2 56.5 21.7 78.2
2015-16 367.9 62.5 24.0 86.5
2016-17 407.4 69.3 26.6 95.9
Source: Working Group Report for XII Plan

* 17% Coal is consumed to produce one tonne of cement

(Progressively reduced from 25% in 1990s because of efficiency improvement)

19
 Coal - Key Issues

 Substantial new capacities have been waiting for

sanction of Long-Term Linkages for more than six
years. This needs to be expedited.
 CIL has switched over from Useful Heat Value (UHV)
to Gross Calorific Value (GCV). Wide variations
between declared GCV to actual GCV in cement
plants causing huge financial losses to coal
consumers.
 Facility of joint sampling at both loading and
unloading points being extended to the power
utilities may also be extended to the cement sector
without embargo of 4 lakh tones subject to their
consent.

20
Contd... Coal - Key Issues

 As per The New Coal Distribution Policy (NCDP) FSAs

have been signed only for 75% of normative requirement,
thus there is ab-initio 25% less programmed for each
unit.
 Threshold for penalty for short supply being 60% only,
actual supplies could come to around 45% of normative
requirement.
 Substantial cement production capacities have been
added during the last few years, but the FSAs are yet to
be signed for these capacities. Matter is pending with
Coal Cos and MOC.

21
Contd... Coal - Key Issues
 Under E auction any entity (irrespective of actual user, trader
etc) can participate. It is experienced that the traders are able to
get substantial quantities of coal under E auction which is then
sold to actual consumers.
 This unnecessarily increases cost of coal for actual
consumers.
 Only actual consumers be allowed to participate under
E-auction with some mechanism for monitoring which may
include self declaration & stringent action on diversion of
coal etc.
 Coal companies are deducting FSA quantity (deemed supply)
based on fixed weight per wagon(66MTX59 Boxes) whereas
actual loading is up to 5%to 7% lower.
 This results into loss of linkage quantity.
FSA quantity supplied is to be considered based on actual
loading & shortfall be supplied at the end of the year by
allotting rake or by road if quantity is less than a rake.

22
Contd... Coal - Key Issues

 Joint inspection for re-verification of the calibration of

the rail/road weighbridges be undertaken at a fixed
interval with prior notification to the consumers.
 Weighbridges of C.I.L. or railway are not always kept in
calibrated condition, erratic weights are part of the
deal.
 Railways are charging freight on the basis of declared
carrying capacity of wagons (which has been periodically
increased in last few years), whereas actual quantity
loaded is lesser than carrying capacity declared.

Railways to Charge freight for 66 M.T./Box - whereas Qty. possible

to load – 63 M.T. Consumer has to pay idle freight of 3 M.T.

23
Contd... Coal - Key Issues

 Steep Penalty on overloading of coal by Rail is charged

from consumers despite their not having any role in the
loading of coal which is done by coal companies &
Railways.
 Penalties are worked out based on in motion weigh
bridge of Railways which do not measure correct
quantity of coal loaded in the wagons.
 During monsoon season, weight of coal get increased
due to rains in transit with higher moisture over which
cement plants have no control.

Need to eliminate this penalty. Joint inspection for re-verification of

the calibration of the rail/road weighbridges be undertaken at a fixed
interval with prior notification to the consumers.

24
Contd... Coal - Key Issues

 Cement Sector is already paying 35% higher

price for coal compared to the regulated coal
price of the power grade coal falling between
G6 to G17 grades.
 This compulsory imposition of 25% of higher
grade of coal falling between G1 to G5 together
with the coal produced from the ‘Cost plus
Mines’ whose price is much higher than the
notified price of coal as pre condition for
signing of FSA should be dispensed with.

25
 ABOUT CEMENT MANUFACTURERS’
ASSOCIATION (CMA)
 Provides a link between the Industry and
Govt. and also serves the cement
industry and its consumers.
 Plays a pivotal role in formulation of
Government policies for cement
industry through continuous dialogues
and interactions.
 Apprises industry of latest Technological
Developments and Cutting Edge
Technologies.
 Educates on rational use of cement
including choice of the right type of
Cements for various applications.
 Creates awareness on the industry’s
efforts on Quality Assurance,
Environmental improvements, Consumer
protection and other related issues.

26
Thank you

27