India Cements, the south Indian cement major, may relocate its proposed 2Mt facility in Himachal Pradesh or put it on hold because of infrastructure hurdles and a slowdown in the cement industry.
The plant, which has seen a delay in commissioning by over a year, faces an uncertain future, denting the company’ expansion plans in the northern region.
On a query over the expected pull-out from Himachal Pradesh, V M Mohan, joint president, corporate (finance), India Cements, said, “We need to get back to you on this.” he added, “We are discussing the issues related to infrastructure with the state government. The project is taking a lot of time as there are no roads (due to the tough terrain) to take up the equipment.”
On whether the company has invested in buying land, Mohan said the company had “dentified the land” and added that it was difficult to set a time-frame for the plant’ commissioning.
The Himachal plant, for which an investment of Rs 800 crore has been earmarked, is India Cements’econd project in the North after the Rajasthan project. The company controls a fourth of the southern market and has plans to double its capacity to 18Mt from the current 9Mt (as of FY08).
“We are thinking of having the project in Himachal Pradesh or at any other site,”aid the company’ top executives at a conference call. They added that the state government had to ensure the infrastructure requirement for setting up the plant. So far, the industry giants, ACC and Ambuja Cements, have been successful in their operations in the state.
Though units in Rajasthan (1.5Mt) and Maharashtra (1Mt) are on track, the Himachal project is lagging far behind. The executives added, “Even if we do not start the Himachal project, our capacity will still be 16Mt (by 2010).”
Industry experts said capacity utilisation was already on the downside and companies would not go for under-utilisation of their capacities. “specially at a time when the GDP is slipping, growth in cement industry too is moderating. With production growth rate being foreseen at 6-7 per cent, the company might hold back the project,”hey added.
According to industry analysts, if the company moves out of Himachal Pradesh, it will have to go for an alternative location in the North itself as it already has enough capacity in the South.