India: Gujjar agitation may hit cement companys in Rajasthan

India: Gujjar agitation may hit cement companys in Rajasthan
Published: 05 June 2008

The Gujjar unrest in Rajasthan and surrounding areas of the national capital region (NCR) is likely to hit cement companies as movement of the building material has been affected due to blockages. The agitation also impacted on the transport of raw material for some companies with trucks and large carriers stranded on national highways, said industry executives.

Rajasthan is the country’s largest cement-producing state and is home to manufacturing facilities of Grasim Industries, Ambuja Cement, Shree Cement, JK Cement and Mangalam Cement, amongst others.

Widespread protests by the Gujjars, who are demanding scheduled tribe status for their community, have brought Rajasthan and parts of the NCR region to a standstill in the past month. "The Gujjar agitation in Rajasthan is a political thing and it’s difficult to gauge any kind of impact on cement industry at this stage," said Shree Cement MD and Cement Manufacturers Association president HM Bangur.

The INR1500 crore Shree Cement, promoted by the Kolkata-based Bangur group, had earlier said it would expand its cement-making capacity in Rajasthan at an estimated cost of INR350 crore. The company will take its total capacity from 8-9Mt.

Ambuja Cements, which sells more than 50 per cent of its production in Rajasthan, said it is too soon to see any impact. Managing director AL Kapur said: "As of now, our despatches are normal but any effect will be visible in the coming days. Even on Monday, we despatched 5000t of cement to Rajasthan."

The impact on sales is likely to push up prices, said analysts. "The agitation may lead to a retail price increase in the western region for few weeks," said Angel Broking analyst Hitesh Agrawal. "Shree Cement and JK Cements are dependent more on the Rajasthan market but it’s too early to say how much the agitation will impact."

Grasim Industries’ Rajasthan plant is expected to go on-stream in the third quarter of the next fiscal. Last year, Grasim and its subsidiary UltraTech commissioned 6.6Mt of clinkerisation units in Rajasthan and Andhra Pradesh, respectively, besides a 2.4Mt grinding unit.

JK Lakshmi Cement, another leading cement producer in north India, is investing INR230 crore for expanding its capacity at the Sirohi unit from 3.4 to 5Mt. Mangalam Cement sells 30 per cent of its production in Rajasthan.

Separately, the government has withdrawn the tax refund scheme under duty entitlement pass book for the cement industry. According to a report by the department of industrial policy and promotion, cement demand is likely to grow at 11.5 per cent during the 11th Plan. Cement production and capacity by the end of the 11th Plan is estimated at 298Mt.

To attain the targeted capacity addition, an investment of INR52,400 crore would be required, the report added.