CEMENT INDUSTRY

Issues Prevalent to Indian Cement Industry

Submitted to: Prof. Debdeep De Submitted By: Naman Agrawal (11609031) Nidhi (11609032) Nikisha Gupta (11609033) Nishant Kaushik (11609034) Parth Bhasin (11609035) Pragati Oberoi (11609036)

EXECUTIVE SUMMARY
Topic: Issues prevalent in the INDIAN CEMENT INDUSTRY

Objective of the Project: The objective of the project is to ascertain the problems concerning the Indian Cement Industry. The project also gives an overview of the industry in context with the study. It also gives us an overview of the performance of the Indian Cement Industry.

Scope of the study: This study entails the issues prevalent in the Indian Cement Industry and also illustrates an analysis of the Environmental impacts on the industry.

Limitations of the Project: The data used is Secondary in nature and encompassed only a few key players of the industry as at large, the industry is huge. The data that is collected is from websites which is historical in nature, market conditions and regulations are subjected to changes.

Research Methodology: The research includes a methodical method which includes assertion of the problem, collection of the facts and conclusion in form of solution to the problems of the Industry. The study is based on the data collected from the internet.

Method of Data Collection: Sources of the Secondary Data: Internet and Websites Annual reports related to the Industry.

Findings:

Price Issues Labour Issues Environmental Impact and Health Issues Issues pertaining to setting up of a Cement Plant

TABLE OF CONTENTS

Contents
EXECUTIVE SUMMARY ..................................................................................................................... 1 TABLE OF CONTENTS ........................................................................................................................ 3 INTRODUCTION ................................................................................................................................... 4 An Overview ........................................................................................................................................ 4 Current Scenario.................................................................................................................................. 4 Facts of the Indian Cement Industry (1982-2009) .............................................................................. 4 Statistics .............................................................................................................................................. 5 Key Drivers of the Cement Industry ................................................................................................... 5 OBJECTIVES ..................................................................................................................................... 6 RESEARCH METHODOLOGY ........................................................................................................ 6 FINDINGS AND ANALYSIS ................................................................................................................ 7 RECCOMENDATIONS ....................................................................................................................... 10 REFERENCES ...................................................................................................................................... 11

INTRODUCTION
An Overview
Cement is one of the core industries playing a vital role in the growth of the nation. It is basically a blend of compounds, entailing mainly silicates and aluminates of calcium, formed out of calcium oxide, silica, aluminium oxide and iron oxide. The demand for cement is dependent on variables like business, financial, real estate and infrastructure sectors of the economy. The Indian cement industry is energy intensive and the third largest user of coal in the country.

Current Scenario
The Indian cement industry is the second largest producer of cement. Indian Cement Industry produces variations of cement such as Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), Portland Blast Furnace Slag Cement (PBFS), Oil Well Cement, Rapid Hardening Portland Cement, Sulphate Resisting Portland Cement, White Cement, etc. They are produced strictly in accordance with the specifications of the Bureau of Indian Standards (BIS). The industry occupies an important place in the national economy because of its strong linkages to other sectors such as construction, transportation, coal and power. The cement industry is also one of the major contributors to the exchequer by way of indirect taxes.

Facts of the Indian Cement Industry (1982-2009)

The Industry recorded an exponential growth with the introduction of partial decontrol in 1982 culminating in total decontrol in 1989. The capacity, which was 29 Mn.t in 1981-82, rose to 219 Mn.t at the end of Financial Year 2009. While it took 8 decades to reach the 1st 100 Mn.t capacity, the 2nd 100 Mn.t was added in just 10 years. India is the second largest producer of cement in the world. The cement Industry produces a variety of cement to suit a host of applications matching the world's best in quality. Exports Cement/Clinker to around 30 countries across the globe and earns precious foreign exchange.

Statistics

Figures in Million Tonnes January 2012 December 2011 January 2012

Description

2011-2012

2010-2011

(Apr-Jan) Cement Production 16.47 Cement Despatches 15.72 14.82 145.00 137.16

16.27

15.76

14.73

143.96

136.18

Key Drivers of the Cement Industry

Buoyant real estate market Increase in infrastructure spending Various governmental programmes like National Rural Employment Guarantee Low-cost housing in urban and rural areas under schemes like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and Indira Aawas Yojana

OBJECTIVES
The objective of the project is to ascertain the problems concerning the Indian Cement Industry. The project also gives an overview of the industry in context with the study. It also gives us an overview of the performance of the Indian Cement Industry.

RESEARCH METHODOLOGY
The research includes a methodical method which includes assertion of the problem, collection of the facts and conclusion in form of solution to the problems of the Industry. The study is based on the data collected from the internet.

Sources of the Secondary Data Internet and Websites Annual reports related to the Industry.

FINDINGS AND ANALYSIS

Effects of Budget 2012

Freight hike: the railways hiking freight rates by 19% to 33% on the eve of the Budget, companies are wasting no time in passing on the burden to customers. Cement manufacturers have hiked prices by at least Rs.12 and as high as Rs.30 per bag (of 50kg), steel manufacturers are expected to announce a price hike in couple of days.

Pricing issues
The input costs that primarily control the price of cement are coal, electricity tariffs, railway transport and freight, royalty and cess on limestone. However, interestingly, government controls the prices of all these components. The main concerns that industry faces in using these inputs for cement production are as follows: Coal: Coal is the main fuel for manufacture of cement in India. The consumption of coal in a typically dry process system ranges from 20-25% of clinker production. This means for per ton clinker produced 0.20-0.25 ton of coal is consumed. The cement industry consumes about 10 million tonnes of coal annually. Since coalfields like Bharat Coking Coal Limited (BCCL), Central Coalfields Limited (CCL) supply poor quality of coal, the industry has to blend highgrade coal with it. However, non-coking coal and petroleum coke attracts a customs duty of 5%, which increases the cost of production in the sector. Electricity: Cement industry consumes about 5.5 billion units of electricity annually with one tonne of cement requiring approximately 120-130 units of electricity. Since state governments supply electricity in India and since different states have different tariff structure, the power tariffs vary according to the location of the plant and on the production process. As a result, cement plants in different states attract different power tariffs. Another major hindrance to the industry is severe power cuts. Most of the cement producing states such as Andhra Pradesh, Madhya Pradesh experience power cuts to the tune of 25-30% every year causing substantial production loss. Limestone: This constitutes the largest bulk in terms of input to cement. For producing one tonne of cement, approximately 1.6 tonnes of limestone is required. Since, the plants near limestone deposits pay less transportation cost than others; the location of cement plant is determined by the location of limestone mines. The total limestone deposit in the country is estimated to be 90 billion tones, with Andhra Pradesh enjoying the largest share of 34%, followed by Karnataka, Gujarat, Madhya Pradesh and Rajasthan, with respective shares of 13%, 13%, 8%, and 6.5%. However, cement manufacturing companies have to shed large

sums of money by way of royalty payment to the central government and cess on royalties levied by the state government. Transportation: Cement is mostly packed in paper bags now. It is then transported either by rail or road. Road transportation beyond 200 kilometres is not economical therefore about 55% cement is carried by the railways. There is also the problem of inadequate availability of wagons. Under this scenario, there is a need to encourage transportation through sea, which is not only economical but also reduces losses in transit. Today, 70% of the cement movement worldwide is by sea compared to 1% in India.

Labour issues
Cement companies utilize various concessions and benefits from the Government and reap huge profits without giving any benefits to the cement workers. The Cement Wage Board regulates the wages of cement workers. The Committee was informed that the wage of the workers in the cement companies over the last ten years is only Rs.2800/-, which is the lowest when compared to other industries.

Environmental Impact and Health issues

The process of producing cement causes negative environmental externalities at all levels of production. To make clinker and mix it to prepare concrete the material must be grounded and heated to more than 1500 degree Celsius. Such energy intensive production releases NOX (nitrogen oxides), CO2 (carbon dioxide), and SO2 (sulphur dioxide). All of these gaseous materials cause harmful effects on the environment and contribute to the global climate change on earth. Cement alone contributes about 5% of the worlds total greenhouse gases. Not only do these gases contribute to global warming, they also contribute to the deteriorating health conditions of employees in these plants. They are facing serious respiratory problems due to the polluted and hazardous non-friendly working conditions. The environmental impact is further complicated through the harmful effects of resource depletion. In order to make cement and burn the components at the aforementioned temperature, the amount of fuel used oil or coalis very high. While clinker is not under the threat of being depleted anytime soon, the economic costs of fuel resource depletion needed to make the cement is under attack. Furthermore once the final product is produced, some solid wastes remain as a result of the production process. Such solid waste, in countries with loose environmental regulations or weak enforcement mechanisms, is thrown into the water or burned in an uncontrolled location. This lack of oversight continues to cause levels of inequality that the world cannot sustain in the long run. Hence, the global cement industry can be characterized as having global distributional inefficiency across space and time.

Issues Pertaining to Setting up of Cement Plant

Its been seen that that the land which is being acquired for the purpose of setting up a cement plant/factory leads to many people being unemployed and landless. Its been observed that the cement factories which are established in agriculture based region normally employ local land owners compensating for acquiring their lands, but agriculturelabourers are left to be unemployed and their problems remain unattended. During the production of cement, a lot of Fly Ash is generated. The land piece which is in proximity to the plant gets degraded and loses the Agricultural Fertility due to the Fly Ash deposition.

RECCOMENDATIONS
The Cement Wage Board should take in consideration the low wages factor and revise the wages of cement workers, immediately and while revising it should take into consideration the wages fixed by Cement Corporation of India (CCI) for its workers and also wages prevailing in other sectors. The Cement plants should also improve the working conditions in their plants by reducing air pollution by strictly following the Ambient Air Quality Standards notified by the Ministry of Environment and Forests. Due consideration should be given to the interests of the local inhabitants and the Government should ensure that the issue of unemployed and displaced labour be addressed fairly before giving the permission to set up a cement plant. The Cement Industry should also take the responsibility of providing all essential facilities to the workers such as education, sanitation, drinking water, health, insurance cover etc.

10

REFERENCES

(http://www.mu.ac.in/arts/social_science/eco/pdfs/depart/dwp1.pdf)

(http://timesofindia.indiatimes.com/business/india-business/Freight-hike-pushes-cementprices/articleshow/12205375.cms) (http://www.business-standard.com/india/news/cement-coal-india/s-price-rise-to-hurt-bigplayers/427120/) (http://newsletters.cii.in/newsletters/mailer/trade_talk/pdf/Cement%20Industry%20in%20India%20Trade%20Perspectives.pdf) (http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Commerce/ 95.pdf) http://www.indiainbusiness.nic.in/industry-infrastructure/industrial-sectors/Cement.htm http://www.wbcsdcement.org/pdf/tf5/cement.pdf

11