R-ADAG eyeing cement business

R-ADAG eyeing cement business

Power-to-telecom business house Reliance Anil Dhirubhai Ambani Group (R-ADAG) plans to enter cement manufacturing by setting up a plant near its 4,000MW coal-fired power project proposed at Sasan in east Madhya Pradesh.

The cement plant proposed by R-ADAG will use millions of tonnes of fly ash generated at the power station, billed ultra mega power project for its large capacity, to produce cement. Fly ash is generated while burning coal.

Not only is the cost of cement production using fly ash 5-10% lower than the cost using the traditional clinker-based method, it also saves on transportation and disposal of a material seen as environment-unfriendly.

“They (R-ADAG) plan to set up a cement plant near the newly bagged power project at Sasan to utilize the fly ash generated from the project," said a senior government official, who did not wish to be identified.

An R-ADAG executive declined details of the cement project. J.P. Chalasani, director, business development, Reliance Energy Ltd, said, “Our company keeps on evaluating various proposals from time to time." Reliance Energy is the parent of Reliance Power Ltd, the company in charge of the Sasan project.

Ultra mega power projects are expected to see a major expansion of cement manufacturing capacity in India with cement companies such as Grasim Industries Ltd, Ultratech Ltd, Sanghi Cement Ltd, The India Cements Ltd, Zuari Cements Ltd and My Home Industries Ltd already evincing interest in setting up greenfield cement plants in the vicinity of such power stations, as reported by Mint on 26 September.

The size of the R-ADAG cement plant was not immediately known. Going by the amount of fly ash—some 9 million tonnes a year—the 4,000MW power project will generate, the cement plant capacity could be huge. One tonne of cement needs an input of 0.2 tonne of fly ash.

“Depending on the amount of fly ash the projected is expected to produce, R-ADAG can put up a capacity of 45 million tonnes per annum (mtpa). But nobody would want to put up such a huge capacity. The impact of R-ADAG’s move will depend on the size of the unit," Rupesh Sankhe, an analyst tracking the commodity for ICICI Direct, said.

The cost of setting up a 1mtpa cement capacity is up to Rs400 crore.

The Rs20,000 crore Sasan project was awarded to Reliance Power after it matched the winning bid for the project after the original winning consortium of Lanco Infratech and Globeleq Singapore was disqualified by a government panel on 25 July for violating terms of the deal.

Analysts said by the time the Sasan project goes online, cement capacity in the country may be less beneficial to cement producers, who have enjoyed a 30-34% price rise in different regions in the past year alone. India, the world’s second largest cement market with Rs55,000 crore estimated demand, has a cement manufacturing capacity of 148mtpa.

“The power project is expected to come up only after 2012, when the cement supply is expected to outstrip demand," Sankhe said.

E.N. Murthy, secretary general of trade body Cement Manufacturers Association, welcomed the capacity addition. “Around 60% of the cement produced in India uses fly ash. In a situation of supply-side constraint, any additional capacity is good news for the industry," he said.

The government had planned nine ultra mega power projects. While those at Sasan, Mundra in Gujarat, Tilaiya in Jharkhand, Krishnapattnam in Andhra Pradesh, Tamil Nadu’s Cheyyur and Orissa’s Jharsuguda are on track, others at Girye in Maharashtra, Tadri in Karnataka and Chhattisgarh’s Akaltara are yet to take off. Sasan, Tilaiya and Jharsuguda are coal pithead projects and those at Mundra, Krishnapattnam and Cheyyur are based on imported coal.

Shilpa Shree contributed to this story.