Cement companies queue up for facilities near mega power plants

Cement companies queue up for facilitiesnear mega power plants

Plans to build several 4,000MW ultra mega power projects in India are expected to have an interesting fallout—a major expansion of cement manufacturing capacity.

Cement companies such as Grasim Industries Ltd, L&T Ultratech Ltd, Sanghi Cement Ltd, The India Cements Ltd, Zuari Cements Ltd and My Home Industries Ltd, among others, have evinced interest to set up greenfield cement plants in the projects’ vicinity in order to utilize the fly ash that would be generated from them.

“What was a waste (ash) has now become a product," said a senior government official, who did not wish to be identified. “This interest is due to the enormous amount of fly ash these projects will generate, which is a key component in the manufacture of cement. The process of giving fly ash to the cement manufacturers would be entirely between the developers of the project and the interested companies."

Two such power projects that have been awarded so far—at Sasan and Mundra—alone have a projected fly ash production of around 8 million tonnes per annum (mtpa). “While Sasan can produce around 7mtpa, Mundra—an imported-coal-based project—will produce 1mtpa due to the lower fly ash content in the imported coal," the government official added.

Says Sanjeev Bafna, joint president and deputy CFO of Grasim Industries: “Use of fly ash brings down the cost of cement production. It makes natural sense to set up grinding units at the source of fly ash. We already have a few units closer to the power plants and are planning a few more. Since the UMPPs are expected to produce more fly ash, we will certainly have an interest in them."

The government had planned nine such power projects. While those at Sasan (Madhya Pradesh), Mundra (Gujarat), Tilaiya (Jharkhand), Krishnapattnam (Andhra Pradesh), Cheyyur (Tamil Nadu) and Jharsuguda (Orissa) are on track, others at Girye (Maharashtra), Tadri (Karnataka), Akaltara (Chhattisgarh) are facing several problems. These projects are expected to be axed.

Of the remaining projects, while Sasan, Tilaiya and Jharsuguda are coal pithead projects, the projects at Mundra, Krishnapattnam and Cheyyur are based on imported coal.

India has a current cement manufacturing capacity of 148mt and is the world’s second largest cement market, with the market size pegged at Rs55,000 crore, next only to China.

“By blending fly ash, the volume of cement production in the country can increase. It will increase the supply but the UMPPs are expected to come up only after 2012. The benefits can be felt only after that time period," says Rupesh Sankhe, an analyst tracking the commodity for ICICI Direct.

The cost of producing a tonne of cement is Rs1,100-1,400. An increase in cement production is also expected to lead to a fall in prices. Meanwhile, cement prices have risen by 30-34% in different regions of India in the past year alone.

The country’s power projects currently produce around 96mtpa of fly ash of which around 28mtpa is utilized by industries such as cement, brick, concrete building and for road paving. The remaining ash is mixed with water and is dumped in ash dykes.

With manufacturers expected to use larger amount of fly ash, the land requirement for its disposal will also decline.