New Delhi: India’s largest electricity producer, NTPC Ltd, will manufacture cement near six of its power plants through ventures with private firms, said a top official.
“We are looking at equityparticipation from private sector companies, the percentage for which will be decided (later),” said T. Sankaralingam, NTPC chairman and managing director.
“All leading private sector cement manufacturers have shown interest. Depending upon the logistics and the discussions, the investment details will be firmed up.”
New territory: NTPC chairman T. Sankaralingam. The company has already issued expressions of interest for joint ventures and received responses from 11 firms. It plans to sign MOUs by September. (Photo: Madhu Kapparath/Mint)
Analysts say a cement plant capable of producing 1 million tonnes per annum (mtpa) costs around Rs400 crore to build.
Power sector analysts see this as an attempt by NTPC to better utilize the 43mtpa of fly ash its coal-fired plants produce, only half of which the company is able to dispose of safely. Indian coal contains high levels of ash that harms the environment.
NTPC can utilize the fly ash better by making cement, to make a tonne of which requires about 150kg of ash.
The move will not only save the company costs of transporting and safely disposing the fly ash, but also enable it to save 5-10% in cement production costs, since making cement by using ash is cheaper that the usual method based on clinker, or powdered cement.
NTPC will set up the units near its power plants at Badarpur in New Delhi, Sipat in Chhattisgarh, Ramagundam in Andhra Pradesh, Barh and Kahalgaon in Bihar, and Rihand in Uttar Pradesh.
While Sipat and Barh are yet to be commissioned, the other plants generate around 8mtpa of fly ash.
The company has already issued expressions of interest to form joint ventures and received responses from 11 firms. It plans to sign memorandums of understanding for the ventures by September.
NTPC is the second power producer to eye cement making.
Reliance- Anil Dhirubhai Ambani Group also plans to manufacture cement by setting up a plant near its 4,000MW coal-fired project proposed at Sasan in eastern Madhya Pradesh, as reported by Mint on 28 September.
However, Rupesh Sankhe, an analyst tracking the commodity for ICICI Direct, advised caution.
“Though this is a smart move on the part of NTPC, but by the time these units may be commissioned, the demand-supply gap will be bridged,” Sankhe said.
“With the new capacities coming in, the demand is expected to be around 212mtpa, with supplies around 242mtpa by 2009-10. This will have a pressure on the cement prices then,” he added.
India, the world’s second largest cement market with an estimated demand worth Rs55,000 crore, has a capacity to produce 148mtpa.
NTPC is the country’s largest fly ash producer because more than 80% of its installed capacity of 29,144MW is coal-fired. It burns 122.94mtpa of coal, and expects fly ash production to grow further as a substantial portion of the capacity it is adding will be based on coal. The company plans to add 22,430MW of capacity by 2012.