The Hindu Business Line : Cement firms add 17 mt capacity in fiscal 2008

Mumbai, April 10 Cement companies have added an additional capacity of 17 million tonnes (mt) in fiscal 2008, as against six million tonnes the previous year. In April 2007, the industry announced a capacity addition of 100 mt over the next three years.

“Though the projects were announced in FY08 it will take at least three to four years for the companies to complete the projects,” said Mr Kamlesh Jain, research analyst, Prabhudas Lilladher Pvt Ltd.

Capacity addition could be marginally higher if one takes into account the many capacity expansions by small and medium-sized companies, said an analyst.

Production for the year ended March 31, 2008 has increased 7.09 per cent to 166 mt.

Project delays

Apart from land acquisition and sourcing of equipment, obtaining mining leases from the State Governments, besides escalating production costs due to higher raw material costs have led to a slowdown in expansion.

A Kolkata-based cement company’s Rs 2,000-crore project in Madhya Pradesh is being delayed due to issues related to land acquisition. The Rs 1,500-crore company has acquired almost 90 per cent of the 1,200-acre project land, but is facing problems acquiring a small area at the centre of the project layout, sources said.

Sourcing of equipments is also a cause for delay as globally, many cement companies are on an expansion spree, said an analyst.

Additions in FY09

Among the major projects expected to go on stream by September this year include that of Grasim and Madras Cements. Grasim has planned a 4 mt-a-year green field unit in Rajasthan and Madras Cements intends to enhance capacity by 2 mt through a greenfield expansion at Ariyalur in Tamil Nadu.

“South India is expected to see capacity expansion of around 10 mt,” said Mr Bhavesh Shah, Vice-President (Research), Asit C Mehta.

Strong demand led to a 17 per cent rise in prices to Rs 258 a 50 kg bag in 2007-08. Mr Vinod Juneja, Deputy Managing Director, Binani Cement, said, “The price rise is basically due to higher raw material cost. Coal prices have gone up almost 100 per cent in the last one year, while that of other raw materials were up 30-35 per cent.”

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