– Bhalchandra Shrikhande, a freelance consultant, speaks on split grinding cement units.
What is your opinion on the ease-of-doing business?
There is lot of hype on "ease-of-doing business", but very little has happened in reality at the ground level. The percolation of progressive policies framed at the macro level to promote fast growth in business and manufacturing are yet to make a difference at the working level. The reasons of this are many.
A few among them are lack of clarity in executing the new policies, non-removal of some old and redundant rules and regulations, insistence to go by the letter, and not the spirit of the rules/regulations, sense of apathy among the government officers due to the fact that doing nothing attracts no penalty, but doing something, albeit with good intention, and not getting the desired result does attract enquiry, audits and penalties. There is no compulsion on the decision-making authorities to take appropriate decisions within a reasonable time frame, and to avoid duplicity of efforts in seeking approvals. Let us all hope that sooner or later ease-of-doing business becomes a reality.
What is your assessment of a business model of split grinding cement unit? What are the critical success parameters?
In the beginning, let us look at the parameters of success of a standalone split grinding cement unit. If we evaluate the parameters along with an integrated cement plant, the picture will not be clear. The success of a split grinding cement unit should be measured by the capacity utilisation and the EBIDTA margin of the unit. While working out the manufacturing cost; one should be judicious enough to consider the market prices of all inputs. Special attention needs to be given to the transfer price of clinker from the integrated plant to the grinding unit. It should be close to the real price of clinker in the market. The cornerstones of successful business grinding unit are:
Volume addition is an essential factor in achieving a reasonably good standalone EBIDTA in split grinding cement units. This depends on the percentage addition of mineral components (MiC) like fly ash or slag at the split unit. It is thus very beneficial to have the location of split unit near the source of MiC, i.e. power plant or steel plant. Such a location also helps to get power generated by the power/steel plant at the split unit reliably and cheaply.
Nearness to market having high potential of growth is another important factor concerning location. This results in the "last mile connectivity" to the end consumer and substantial logistics cost saving as well.
Can more of bulk cement (loose cement despatched in bulkers) be a better option for split grinding cement unit along with a smaller proportion of bagged cement?
In today’s world, the operating strategies must keep the customer at the focal point. Customers have different requirements at different times. E.g.: when a construction project is nearing completion, the customer may need more of masonry cement or readymade dry plaster or blended cement of lower grade for flooring/ tiling applications, that too in bags. When concreting job is in progress, he will need cement (OPC) of higher grades in bulkers. Therefore, the grinding unit must be able to cater to all the requirements of the customers. No split grinding plant can survive on bulk cement supply alone. Generally bulk cement goes to large infrastructure and residential projects, and RMC plants. These locations have dedicated batching plants at site. Small retail end users however prefer cement in bags. For packing the cement of different grades in bags, you need to have a packing plant with more number of cement storage silos. For supply of cement in bulk, you need to have arrangements for accommodating different types of bulkers directly under the silos and loading arrangements. Therefore, in order to be successful, you will need all the flexibility in the grinding unit.
The last mile connectivity also eliminates need to have warehouses, reduces double handling and transportation to the point of consumption, on-time delivery, and better quality perception in the mind of the customers.
Logistic seems to be a big challenge for split grinding plants, please comment. Inward and outward movement of materials being critical, how important it becomes to monitor and manage logistics?
Yes, logistics is a considerable challenge and an important cost component especially when you are sourcing clinker as a vendor. Incoming material logistics is essentially a bulk movement either by a rail or a ship. Clinker is moved by railway wagons and directly unloaded by wagon tippler inside the plant. The outgoing movement of cement by rail is desirable but not always feasible. You however need to have good road connectivity for cement evacuation. Export-oriented cement units are required to be located at ports near sea to facilitate direct loading of ships/barges.
Should split grinding cement units be automated by using modern technology in a better way than normal cement plants?
As a corollary to my earlier statement, I would add that to meet challenging customer requirements, like quick delivery and better quality assurance, usage of modern technology is the need of the hour. IoT (Internet of Things) has been successfully used by some cement grinding units for despatch of cement. Today transporters are given smart cards where the entire data of sales order is stored. This results in faster turnaround time of a truck/trailer/bulker. Ready availability of different grades of cement simultaneously meets diverse customer needs. Flexible plant design can operate fast only if equipped with good automation. At short notice you have to shift from one to the other product, different quantities, and different packaging and this can be managed by IoT. Having weighbridges under the loading spouts, auto loading spouts, automatic bag placers, auto pelletizers and loaders, CCTV monitoring of operations etc. help in managing complex tasks easily. Dependence on labour is not only unreliable and costly, but can also lead to delays.
Throw some light on the power scenario of such grinding unit?
For a given split cement grinding unit, power requirement is generally of the order of 8 to 12 MW depending on the size of the unit. In majority of cases power is drawn from the adjoining thermal power plant. If there is steel plant, power can be tapped from the steel plant CPP. In most of the cases it is B2B type of transaction. The practical way is to route it through HT cables. Grid power is unreliable, but given the nature of the grinding unit, this can be managed. However, installing a captive power plant, which is based on multiple DG sets, is ruled out because of high cost. My suggestion is rules should be simplified to draw power from wherever it is convenient and simple.
Most of the split grinding plants are located close to sea or river for easy water way transportation is it correct?
Considering that a very small quantity of cement today is getting exported, in the present situation location near to a port hardly matters. But waterways transport by rivers is an interesting option, which needs to be explored. Water transport eases load on the roads, reduces pollution and is more cost effective.
Is it possible for a grinding plant to invest money in improving the quality of blended materials like fly ash or slag? What has been the practice?
It is very much essential to pre-process the fly ash or slag. Quality of fly ash differs in properties with its particle size distribution. Generally for processing of fly ash, mechanical air classifiers are deployed. Finer the fly ash or slag, more reactive it is, and more value it commands. Superfine fly ash/slag can be directly added to concrete to produce high-performance concrete (HPC). Medium grade fly ash/ground granulated blast-furnace slag (GGBS) can be used to manufacture common grades of concrete. Coarse fly ash can be used in the spilt grinding unit to be co-ground with clinker. In case of blast furnace slag, the problem is getting slag lumps that need to be separated. The extent of addition of fly ash/slag component in cement depends on its quality. With better quality of fly ash or slag, more proportion can be added in cement (within what is prescribed by Bureau of Indian Standards (BIS) and the profitability of the grinding unit will be better.
Do you suggest any better tax structure to make grinding units viable?
Today cement attracts GST at 28 per cent, which is in the highest bracket. Being a basic commodity of construction and infrastructure, the tax component is certainly on the higher side. If the overall industry gets a relief of lower tax rate, then the grinding units also will get the benefit.
Bhalchandra Shrikhande graduated from IIT, Bombay
in Chemical Engineering, and joined ACC Ltd in 1980. After working in ACC for 31 years, he then joined the Indiabulls (now, Rattan India) Group as President – Operations in 2011. At present, Shrikhande is working as a freelance consultant. The businesses in which he has worked are cement and ready-mix concrete.
The functional areas in which he has worked are R&D, process engineering and development, production, strategy/business planning, project execution and management, project engineering and design, management audits, consultancy assignments, organisational development and training.
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