India; Gujarat mining policy to perk up cement capacity

India; Gujarat mining policy to perk up cement capacity
15 February 2010

The Gujarat Government’s decision to put its mining policy on the fast track will give a new lease of life to eight cement companies that plan to add 22Mt of capacity.

The list includes Reliance Cement, Ambuja, Dalmia, Binani, J.K. Lakshmi and Shree Cement.

The Gujarat Mineral Development Corporation (GMDC) has asked for project details of companies that have signed pacts to set up plants during Vibrant Gujarat 2009, said a cement company official.

“Most issues regarding the mining lease are close to being resolved and the necessary rules are being put in place. We hope to get the mining lease for 30 years for the limestone available in the Junagadh and Kutch regions,” he said.

Cement companies now have to bid for the limestone blocks to be put up for auction by GMDC. 

Jaiprakash Associates has recently set up 2.4Mtpa of capacity at Sewagram near Kutch with an investment of INR1500 crore. Binani Cement has acquired about 25 acres for setting up a 2Mta plant in the State for INR1000 crore.

Though capacity utilisation of most companies has improved since the start of this year, it may come under pressure once the new additions go on stream. The industry’s utilisation had dipped to 80 per cent in November from nearly 100 per cent in March 2009.

With new capacities being added, it is expected to fall to 80.5 per cent in 2010 from 91.5 per cent last year.

It may, however, improve marginally to 80.6 per cent next year with signs of improvement in demand, said a research analyst.

Addition of new capacities on the back of a fall in demand has led to a downturn in capacity utilisation in the industry.

“Cement manufacturers had reduced their operating capacity utilisation to maintain the demand-supply situation. It also helps them reduce inventories when demand dips,” the official said.

Published under Cement News