Process

Master of ?Make in India?

Published

on

Shares

When even a pebble dropped in a mighty river causes ripples, consolidation of giants causes a churn too. As part of their proposed merger, Lafarge and Holcim will sell assets worth 6.5 billion euros, located in Europe, Canada, Brazil and Philippines, to Irish cement maker CRH. Ultratech had earlier placed a bid for assets worth around $2 billion in Brazil and Philippines; but decided to drop out at the final stage. It was mandatory for the consolidation of the two firms to shed some assets to comply with the regulatory requirements. However, they are unlikely to sell any assets in India.

On the coal front, cement companies together lost allocations to 12 coal blocks following the Supreme Court order that held all captive coal allocations as illegal. This month, all the major players have to bid for most of the blocks; of the 46 blocks to be allocated in the first phase, 30 are assigned to the unregulated sector. Out of 30, only two blocks – at Sial Ghogri and Mandla North, in Madhya Pradesh – already have the infrastructure for end-use of cement. Prism Cement and JP Associates were the prior owners of the mentioned blocks. The remaining 28 blocks are open for the aforementioned unregulated sectors. Coal linkages with sub-standard coal grade allocated to the cement sector previously led to a greater dependence on costly imported coal, and coal procurement from the open market reached 30-35 per cent of total coal consumption in 2013-14, as the power sector was prioritised for domestic coal supply. As demand growth slowed and operating costs rose, the industry?s operating margins fell to 15 per cent in 2013-14 from 28 per cent in 2009-10. Falling imported coal prices, is expected to reduce cost pressures through lower fuel costs, which is further expected to decline by 3-4 per cent in 2014-15. In particular, cement plants that have higher reliance on coal imports, will witness a much sharper reduction in fuel costs. The interest in bidding for coal blocks is driven by the need to contain impact when coal prices turn volatile.

Meanwhile, the industry is groaning under the weight of 100MTof surplus cement capacity as duty-free import of cement still continues unabated. With the union budget round the corner, the industry awaits supportive measures that could trigger the demand and further the growth of the industry.

Some of the major issues which need attention:

  • Treatment of the cement industry at par with the power
  • Encouragement and incentivisation needed for greater usage of AFR in the cement manufacturing by making inter-state movement of municipal and other wastes hassle-free and also making their use commercially viable.
  • Incentivisation of cement and clinker exports.
  • Abolishment of import duties on inputs, namely, limestone, gypsum, pet coke, packing bags, etc. this would give further fillip to the Indian cement industry, in terms of its global competitiveness and viability.
  • Reduction in the tax burden at least by 25 per cent and thereafter, gradually put it at par with average tax on cement in the Asia Pacific Region, which is just 11.4 per cent.

The budget also offers an opportunity for the Finance Minster to kick start economic and industrial growth. Cement industry has mastered manufacturing in India. The ?Make in India? campaign can highlight India?s cement making prowess as a success story and therefore supporting the industry is critical to the campaign as well.

Leave a Reply

Your email address will not be published. Required fields are marked *

Trending News

© COPYRIGHT 2024 ASAPP Info Global Services Pvt. Ltd. All Right Reserved.