New Delhi: Reliance Anil Dhirubhai Ambani Group (R-Adag) plans to set up a 20 million tonnes per annum (mtpa) cement plant near Satna in Madhya Pradesh at an investment of Rs10,000 crore to cater to growing demand for the product in the country, and leveraging its own production of fly ash, a by-product of coal-based power generation and a key ingredient in the manufacture of cement.
The plant being set up by the group, which also has interests in power generation through Reliance Power Ltd, will be the largest in India in terms of capacity.
R-Adag is looking to set up cement units close to its coal-powered projects.
The group is forming a separate company for the cement business, which will be headed by Arvind Pathak, former business head for the southern and western region at ACC Ltd.
HARD LOGIC (Graphic)
“Apart from fly ash for the cement project, we need limestone. We have been working for the past one year to identify limestone mines for the Madhya Pradesh cement project. We have received the prospective licence for one limestone mine having 250mt of reserves. We will also be applying for more such mines in the area,” said a spokesperson for R-Adag.
Mint had reported on 28 September that R-Adag was planning to enter the cement business.
The Madhya Pradesh cement project will be in the vicinity of R-Adag’s 4,000MW power project at Sasan. Its production will be used to cater to the central Indian market.
“The cement plant near Sasan will be functional in sync with the commissioning of the power project,” the spokesperson added.
Fly ash is generated while burning coal. One tonne of cement needs an input of 0.2 tonne of fly ash. Not only is the cost of cement produced from fly ash 5-10% lower when compared with cement produced the traditional way, but it also saves on transportation and disposal of a material considered detrimental to the environment.
Reliance Power plans to set up power projects having a total capacity of 28,200MW in India that may involve an investment of Rs1.10 trillion. Of this, more than one-third, or 9,420MW, will have to use coal procured locally as a fuel.
Indian coal contains a high level of ash.
Analysts, however, aren’t convinced about the merits of the planned diversification. They say that by the time the Sasan project goes on stream and other such facilities come up, India could be producing more cement than it needs. Thanks to rising demand, cement producers have seen prices rise 30-34% in the past year alone. India is the world’s second largest cement market and has a cement manufacturing capacity of 189mtpa, which is expected to go up to 245mtpa by 2010.
“R-Adag plans to focus on the central region from its Madhya Pradesh project as freight comprises 22% of the total cost of (cement) production. However, the cement project (of R-Adag) is expected to come up only after 2012, when cement supply is expected to outstrip demand. This will result in a reduced return on capital for the company. The company could initially go for volume and will play later for the margins. Most of the cement manufacturers are enjoying huge margins today. With Reliance’s 20mtpa capacity coming, the margins of other manufacturers will come undone due to competitive pressure,” said Rupesh Sankhe, an analyst who tracks the cement sector for ICICI Direct.
Other power firms have also been attracted to cement manufacturing. India’s largest electricity producer, NTPC Ltd, will manufacture cement near six of its power plants through partnerships with private firms, as reported by Mint on 29 April.