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The cement plants were unviable with the break-even production exceeding 100 per cent of the plant's capacity during the last four years.

CHENNAI, May 10

THE Comptroller and Auditor-General (CAG) of India has recommended the immediate sale of the manufacturing units belonging to Tamil Nadu Cements Corporation Ltd because of doubts about their viability.

According to the report of the CAG for the year ended March 31, 2001, tabled in the Assembly on Friday, the two cement units of Tamil Nadu Cements Corporation Ltd had incurred a production loss of Rs 239.45 crore due to controllable factors over the last five years, and in the kilns the production loss was Rs 108.48 crore.

Both the cement plants were unviable with the break-even production exceeding 100 per cent of the plant's capacity during the last four years in the case of Alangulam plant and the last two years for Ariyalur plant.

Against an installed capacity of four lakh tonnes per year at Alangulam and five lakh tonnes at Ariyalur, the capacity utilisation over the last five years at Alangulam ranged between 57 and 76 per cent, according to the report.

The main reasons for the low capacity utilisation were poor quality of limestone and poor operation of the supporting mills.

Power and coal are the two main components of cost in cement production, and cost reduction in these was crucial to minimising the production cost.

However, the actual power consumption at both the units was higher than the norms fixed by the company.

This contributed to an extra expenditure of Rs 5.62 crore-Rs 2.84 crore at Alangulam and Rs 2.78 crore at Ariyalur during the four years up to 1999-2000.

While the company proposed in May 1997 to use imported coal as fuel instead of indigenous coal, and gave administrative approval in 1998, it did not import coal due to non-finalisation of tenders.

According to company estimates, the use of imported coal would result in a savings of Rs 16.40 crore per year. It is pertinent to point out that of the 11 cement plants in Tamil Nadu, nine plants use imported coal.

Further, the company did not explore the possibility of procuring cheaper coal indigenously.

It had also not complied with the Tamil Nadu Pollution Control Board's suggestions and directives regarding pollution control.

The company, which earned steady profits up to 1997-98, deteriorated and started incurring losses resulting in complete erosion of capital.

The poor performance was due to non-modernisation of plants resulting in high cost of production.

Further, the asbestos sheet unit at Alangulam incurred losses due to high cost of production and entry of competitors, and the pipe units at Mayanur and Vridhachalam were also suffering due to lack of orders, the report added.

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