Getting the last mile connectivity with Indian railway network is an extremely ...

Getting the last mile connectivity with Indian railway network is an extremely ...

The process of obtaining design and engineering clearances from the railways is very cumbersome and takes lot of time. Though the liberalised siding policy of 31 January 2012 stipulates a time frame of four months for engineering scale plan clearance, there is poor compliance with these timelines, says
Arvind Pathak, Chief Executive Officer, Reliance Cement.
Excerpts from the interview.

What are the challenges in supply chain management as faced by the cement industry?
Logistics cost account for almost 25 to 30 per cent of the total delivered cost of cement. Recent hikes in rail freight rates and diesel prices have put an enormous burden on the industry. On the other hand, service level expectations of the customers have risen significantly in recent years. Customers are insisting on on-time deliveries, smaller loads and fresh material. The key challenge faced by the industry today is to strike a balance between cost and services.

How is your supply chain cost divided on different fronts such as inbound and outbound transportation, warehousing, inventory, transit loss, etc?
Essentially depends on plant location, distance from market / mines, mode of transport for inward and outward traffic, etc. On an average, inbound transportation costs account for 25 per cent and outbound for 70 per cent of the total transportation costs. The balance 5 per cent is accounted for by warehousing, inventory, transit loss, etc.

Are you considering automating the cement loading and unloading process?
Yes, because there are key benefits to automating cement loading and unloading process like faster turnaround time for transportation assets, efficient and pollution free loading / unloading along with minimal damage to cement bags.

Why has cement transport via BCCW not picked up that well in our country?
There are several reasons for this. Primarily, it has not picked-up due to: Cost of building infrastructure: Heavy investment required in building up the necessary rail infrastructure both at the loading and at the unloading end.

Insufficient asset utilisation:
High investment cost of BCCW rakes is another deterrent. Fifteen per cent of the freight rebate available under the Liberalised Wagon Investment Scheme is not sufficient to cover the fixed cost of rake on account of low average speed of goods trains in India (~40 km/hr). This leads to increased turnaround time consequently to poor asset utilisation.

Lack of incentives for bulk transport:
The government has not provided any additional freight incentive for transporting cement in bulk. The rail freight rate is the same for both bagged and bulk cement.

How do you deal with product loss in transit or during storage?
Shortages resulting out of pilferage, if any, are debited to the warehouse operator. Shortages that occur as a result of transit losses, if any, are debited to the concerned transporter. However, these issues continue to be a challenge for the industry.

Are you planning to build a terminal in the near future?
We are building private rail sidings / terminals at all our upcoming integrated cement units. There are few hindrances in the process, like:

Obtaining design and engineering clearances: The process of obtaining design and engineering clearances from railways is very cumbersome and takes a lot of time. Though the liberalised siding policy of 31 January 2012 stipulates a time frame of four months for Engineering Scale Plan Clearance, there is poor compliance with these timelines.

Unavailability of land:
Existing stations along the Indian railway network are very congested. Limited availability of land in the vicinity of the connecting station makes getting the last mile connectivity with the Indian railway network an extremely tedious task. To make the matters worse, the railways, of late , has been very reluctant to give railway land to private parties for last mile connectivity.

Lack of station infrastructure: Rail yard and signalling infrastructure at the existing stations is generally very poor. Due to the financial crunch faced by the railways, they are unwilling to invest in the connecting station infrastructure. Thus, the private party not only has to bear the cost of rail terminal but also the cost of augmenting the infrastructure at the connecting station. This raises the investment cost of setting up a private rail sidings / terminal very high.

What are the advantages / disadvantages of employing carry and forward agents?
Having carry forwarding agents has both pros and cons to it. Advantages: The act as your business developer for new /existing markets. They play the role of an influencer. They are a means of secured payments. They provide the necessary additional manpower when required. Disadvantages:There is always a high risk of the CFA leaving the organisation. Additional discounts. Low market control.

Are you open to collaborate with other cement companies for setting up a terminal?
Yes, we are. But the decision about collaboration will be made on a case- to- case basis. Customers are insisting on on-time deliveries, smaller loads and fresh material.

Reliance Cement
Reliance Cement, set up in 2007, is a hundred per cent subsidiary of Reliance Infrastructure Limited. The company has two projects located at Madhya Pradesh and Maharashtra with a combined capacity of 10 MTPA. The Madhya Pradesh project has an integrated unit at Maihar, a blending unit at Gondavali and a grinding unit at Rae Bareilly in Uttar Pradesh. The Maharashtra project has an integrated unit at Yavatmal and a grinding unit at Butibori. Phase I of the Butibori unit was commissioned in 2012 and is currently catering to the markets in Vidharbaha region. The Maihar unit is on a fast track and slated to be commissioned in 2013. The company aspires to build a capacity of 50 MTPA and be counted amongst the top five cement companies in India. Being a growth focused company; process optimisation for sustainable business is one of the core values for the company.

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