Cement industry today and the challenges ahead
Cement industry, which has completed 100 years of its service to the nation in October 2014, occupies an important place in the national economy because of its strong linkages to other sectors, such as construction, transportation, coal and power.
Sluggish growth and idle cement capacity
For the last few years, the industry has been suffering on account of sluggish cement offtake. A huge mismatch between the cement demand and the cement capacity created by the Industry on the back of government´s future projections earlier has resulted in a sharp drop in its capacity utilisation to 70 per cent. Today, cement industry is having an estimated idle cement capacity of about 116 million tonnes (mn t) entailing a dead investment of about Rs 90,000 crore cost.
Cement Demand by 2019-20
If various initiatives and announcements of the government for infrastructure and housing development is any indication, the cement demand even at 9 per cent annual growth would mean an additional requirement of 150 mn t cement in the next five years (See Table).
Likely cement demand in 2020 at 9 per cent growth to meet government´s future plans and inputs requirements.
Revival of cement demand can happen if all infrastructure projects in the country including cement concrete highways, ports, airports, etc. (b) Housing for all by 2022 (c) Creation of 100 smart cities (d) Dedicated freight corridors (e) Swacch Bharat, (f) Make in India, etc., as announced by the Prime Minister, are executed on time.
It takes about 3-5 years to create additional cement capacity. Therefore, to meet the likely future requirement of cement in the country, it is imperative for cement industry to know sector-wise/ year-wise cement requirement with funds allocation to enable them to create required additional cement capacity in advance. The Nodal Ministry for Cement, DIPP are best suited for organising to collect the data. Since cement and GDP have a symbiotic relationship, the revival in cement demand will have a domino effect on the economy. This would also go a long way in realising the various socio-economic schemes launched by Narendra Modi recently namely, world-class infrastructure, Make in India, Swacch Bharat Aabiyan, Downstream employment generation, environment protection, conservation of mines, etc.
With the adoption of massive modernisation and assimilation of state-of-art technologies, Indian Cement plants are today amongst the most energy- efficient and environment-friendly that are comparable to the best in the world in all respects, whether it is kiln size, technology, energy consumption or environment friendliness. This industry has progressively reduced its energy consumption and power consumption over a period of time refer to the adjoining table. Presently, about 99 per cent of the total capacity in the industry is based on modern and environment-friendly dry process technology.
India in Globe
Today, India produces about 7 per cent of the global production. The quality of Indian cement is comparable to the best in the world. In 2013, world cement production reached a level of 4,000 mn t. However, it is a matter of concern for India that even after becoming the 2nd largest cement producer in the world, next only to China, its per capita cement consumption is very low at 218 kg, which is much below the global average of 543 kg and remains even much below the countries having less than 2 per cent share in the world production, such as, USA, Japan, Turkey, Brazil, Korea and Russia.
Coal is one of the major raw materials needed by the industry both in the manufacturing of cement and also for generating power. Over the last couple of years, the cement industry´s need has not been duly addressed by the government in meeting its coal requirement due to diversion of coal to the power sector. Cement companies, therefore, have perforce to resort to either open market purchase or imported coal at a much higher costs which also adds up significantly to the cost of production.
Dwindling availability of coal
Linked coal supplies further plunged in FY2014-15, to 26 per cent of total fuel requirement from 32 per cent in FY2013-14. No coal linkages have been granted since 2007, while new cement units and CPPs have come up and are in operation. This has obliged the cement industry to meet its balance 74 per cent fuel requirement from costlier imported coal, e-auction pet coke, and other fuels.
More than 175 coal linkage applications, which are pending with MOC since 2008 have not fructified into FSAs although new cement kilns and CPPs are in operation. Cement companies despite having coal linkage could not sign FSA due to allocation of coal block. Subsequently, their coal blocks are canceled as a result of Supreme Court Judgment in September 2014. Now Cement Plant neither have coal block nor coal Linkage despite their plants in operation.
The recent proposal to take the auction route for the existing coal linkages will further adversely affect the economics of the working of these units whose projects were worked out on the assumption of linked coal being made available.
Efforts towards AFR usage
To supplement its energy needs, the cement industry has been making concerted efforts over the last few years to enhance the usage of alternate fuels in place of fossil fuel-coal like solid municipal wastes, paint sludge, biomass and waste heat recovery (WHR) through co-generation after making huge investments in process technology, but the success rate is not encouraging due to certain technical, regulatory and policy-related constraints being encountered by the industry. The present TSR value is less than 1 per cent and it has potential to reach 15 per cent by the year 2020 given right enabling environment.
It is reported that presently India generates over 435 mn t of wastes annually (municipal, industrial and agricultural wastes combined together), which is bound to scale up substantially in the near future due to rapid urbanisation and industrialisation.
Today for the waste disposal, no other solution is economically better than that offered by the cement industry. All other solutions entail huge capital cost, whereas the cement kilns are already in existence and are looking for alternate fuel source. The use of waste as alternative fuels in the cement kilns has its own benefits in the form of reduced usage of fossil fuels, such as coal and maximisation of recovery of energy from waste. All developed nations globally have utilised cement kilns in their countries as an effective option for industrial, municipal and hazardous waste disposal. In India, the usage of AFR needs to be encouraged by the government in respect of its consistent and sustained availability and financial viability to the users.
Challenges in AFR usage
There are a number of challenges faced by the Indian cement industry with regards to using waste for co-processing. As the data available on the quantity and quality of waste is minimal or outdated, cement industries have to spend a considerable amount of time and resources in exploring the availability of different types of alternative fuels. Also, wastes received by cement plants have varying chemical compositions. Co-processing of such heterogeneous wastes poses considerable difficulty as these require pre-processing to generate a uniform quality of AFR.
The need is to put in place a set of regulatory measures which make it mandatory for the local bodies to make available cement grade RDF on a consistent and sustained basis by imposing reasonable cost on the generators and creating infrastructure for storage and processing to convert municipal solid wastes (MSW) into RDF. The policies should be framed in such a way that more and more plants are encouraged to use industrial and municipal waste because it will give long term solution considering the rapid growth in urbanisation and industrialisation.
In the context of the development of the proposed 100 smart cities and ´Swachh Bharat Abiyan´, it is essential that an effective and vibrant ´waste management handling system´ should be put in place. This will help and ensure the Indian cement industry contributing significantly to fulfill two missions of the Prime Minister.
Fly ash utilisation
It is estimated that the current coal-based thermal power capacity at 1,53,571 MW will require about 61,400 acres of land at 0.4 acre land requirement for per MW capacity. This land requirement would go up further exponentially due to the projected enhancement in the capacity of coal-based thermal power houses in the country. In order to prevent the dumping and disposal of fly ash problem, the Ministry of Environment and Forests had issued a Notification in 1999 making it mandatory for thermal power plants to supply fly ash at free of cost for at least 10 years to all the stakeholders.
The industry made certain changes in its manufacturing processes, and, also set up grinding units, nearer the thermal power houses, to use more fly ash by making huge investments running into several thousands crores of rupees. As a result, the production of fly ash-based cement had gone up from about 19 per cent of the total cement production in 1999 to over 67 per cent by 2009.
The utilisation of fly ash by the cement industry, however, received a big set-back in 2009 when the MoEF issued an amendment to its 1999 notification making the fly ash a priced commodity and making it mandatory for the cement industry, having captive power plants, to provide 20 per cent of the fly ash generated by them ´Free of Cost´ to the small brick/tile manufacturers within 100 kms vicinity of their plants, which otherwise would have been utilised by the cement plants for their own consumption.
As a consequence of this notification, the production of blended cement in the country has again started registering a declining trend and today it is about 60 per cent of the production. This has also lowered the average utilisation of fly ash by the industry to around 40 per cent of the total recycled fly ash as against 55 per cent a couple of years back. Such a trend if not reversed, will result in a lot of concomitant environmental and health related problems.
Emission Standards: The notification prescribing the emission standards were issued on August 25, 2014. Since these standards are being implemented for the first time they need to take into consideration realistic and achievable levels to begin with which could be reviewed subsequently.
The Standard of 100 mg/Nm3 fixed for SO2 is the lowest in the whole world. In cases where pyritic sulphur is present in limestone (6 to 9 cement plants only) there is a case for relaxation. In UK, for example, the range varies between 600 to 2500 mg/Nm3 in case of pyritic surplus being used and the limits are fixed on a case-to-case basis.
Particulate Matter (PM): Norms have been also fixed without considering ground realities. For a realistic standard, Vintage plants need to be considered differently, as they have various constraints in achieving the standards by making changes in the pollution control equipment like structural(plant) layout and space.
Environmental Clearances and Public Hearing: Single window clearance for projects need to be considered seriously by Centre & State. Further, in case of expansion projects having no additional land requirements, public hearing should be exempted and the entire procedure needs to be simplified and the complaints/suggestions of local residents affected by the Project should be considered.
Additionally, in case of acquisitions and mergers of businesses, transfer of Environment Clearance (EC) and Forest Clearance (FC) need to be processed on an expeditious basis.
For online monitoring, a uniform policy needs to be adopted and the State Pollution Control Boards (SPCBs) should ensure availability and maintenance of servers for transfer of online data instead of additionally burdening industry.
Cement is the third largest freight contributor to the Railways. Rail share for cement, as a percentage to total dispatches, has been on constant decline. Today it is 34 per cent as against 50 per cent a decade-and-a-half-back.
The freight rates for cement have gone up by 67 per cent in the last four-and- a-half-years. Today, transportation of cement by Road has become more economical and, therefore, a preferred mode of transport, particularly for leads up to 400 km.
Railways freight target
Railways have now targeted to increase their annual freight carrying capacity from 1 billion tonne to 1.5 billion tonne in the next five years. There is a huge potential waiting for the Railways to tap a major portion, anything between 40-45 per cent of their additional freight targets of the 0.5 billion from the cement industry itself with the creation of a positive business environment for the consumers.
Today, road transportation has become much cheaper than rail transport within a lead of 500 km. Therefore, there is need to lower the rail freight rates considerably for the movement of cement and clinker to make it comparable with the road transport as business preposition.
Also rakes (wagons) requirement of the industry for cement, clinker and other input materials must be met in full throughout the year on demand on a consistent basis. Further, there is also a strong case that cement industry is accorded the same priority as the power sector so far as supply of wagons for indigenous as well as imported coal and pet coke is concerned to ensure fair treatment to all sectors for growth in manufacturing sector in India. In addition, all major rail terminals handling cement should be mechanised for faster evacuation of materials and also for creating warehousing facilities at sidings.
Exports becoming unviable
During the last two decades, the Indian cement has made its strong presence in various countries across the globe and it has extended its presence in more than 40 countries. Some cement plants have even exported their technology and set up cement plants on joint venture.
Despite our above strengths, cement and clinker export started declining from 2005-06 onwards due to a variety of reasons particularly concerning global financial crisis, creation of capacities in emerging markets, infrastructural bottlenecks at ports/border points, absence of bulk handling and high rates of State levies and royalties for which no Cenvat Credit is available. In addition to these constraints, Government´s encouragement for import of cement with no custom duty in the last few years have distorted a level playing field between domestic produce and imported cement thus resulting in further discouragement of cement export from India. Due to its well proven strengths, India has tremendous potential to expand its export markets of cement and clinker. It has potential to reach up to 10 per cent of the domestic production or 25-30 mtpa. However, the viability and competitiveness of exports also depends on the comparative situation prevalent in the international market. At present it is not remunerative enough to export clinker or cement for the Indian cement industry as realisation within country is better than that in the overseas market. If government can provide level-playing field the industry would be encouraged to export cement.
The medium to long-term outlook of the cement industry looks to be good going by the bold policy measures taken by Narendra Modi to revive the sagging economy and also the roadmap drawn for the development of expressways, cement concrete national highways, dedicated freight corridors, rural and urban roads, airports, port connectivity, development of 100 smart cities, housing for all by 2022, etc. To meet these ambitious targets, the cement industry is prepared and willing to proactively play its role in contributing its mite in the growth and development of the infrastructure sectors and looks up to the government to address its concerns.
Likely Cement Demand In 2020 At 9% Growth To Meet Govt's Future Plans And Inputs Requirements
|Cement Production(Mn.t)||270.22 @||415.00|
|Cement Cap. (Mn.t)||386.00 $||460.00|
|(at 90% utilization)|
|Coal for Kilns and CPP (Mn.t)||63.00||108.00|
|Limestone (1.5 times of production)
|Gypsum (5% of production) (Mn.t)||14.00||21.00|
|(worked on 20 mw requirement for
one MT production)
Improvement in Thermal power Consumption
|Year||kwh/t of Cement|
Improvement in Power Consumption
|Year||kwh/t of Cement|
Break-up of Alternate Fuels and Raw Materials Availability in 2014
|Alternate Fuel / |
|Total Availability |
|Municipal Solid Wastes||75.00|
|Industrial Plastic Waste||0.20|
|Blast Furnace Slag||10.00|