We refute the allegations of cartelisation

We refute the allegations of cartelisation

Hans Fuchs, Managing Director and CEO, ACC
ACC had recently been in news for the issue of cartelisation. Hans Fuchs, MD and CEO, of the company talks to
ICR
about their quality standards and their new cement plant.

At present, what is the total size of the RMC industry in India? What are the major factors driving this growth?
The total size of RMC in India is approximately 60 mio cum. However, the RMC produced from commercial RMC supplies is approximately 22 mio cum. The reason for this is that a lot of on-site production takes place and is actually increasing. This is backward Integration market (contractors and builders erecting and operating their own plants From our statistics and forecast we expect the residential segment to account for about 29 per cent of the demand while Infrastructure (roads, powers, railways, airports etc) and commercial construction (commercial complexes, retail stores etc) segments are likely to constitute about 33 per cent and 38 per cent respectively.
Mostly all the major companies have faced a slump of 20-25 per cent in the first two quarters. How did your company perform in the first two quarters?
In Q1 and Q2 the total RMC market has dropped by 8 per cent as growth in metros due to subdued residential and commercial activity as high inventory levels and liquidity issues persist. During this time our volumes have dropped in line with the market.
Despite India being the second largest producer of cement, the penetration of RMC is abysmal. According to you, what are the reasons for this?
The reality is really amazing as penetration in the total concrete market is still well below 10 per cent. As purchasers in India RMC we seemed to be obsessed with L1 (The lowest quote). When looking at the concrete on site often the view is very often myopic and the true cost is never calculated. This then ends up with an on-site facility being used which often is of very dubious quality in every sense of the operation from quality to permitting. The cost overruns from this type of operation are usually just buried in the ongoing contract costs and are never really highlighted. I have seen major issues on these sites with quality, material wastages, labour, plant and equipment operation and major safety and environmental breaches. All of this has a cost and when weighing this all up, I really believe that deliveries from a responsible, reputable and quality RMC Supplier such as ACC Concrete save a considerable amount of money over the contract duration. Other reasons stated for the none use of RMC has been due to availability in supplies, which really is something that can be rectified with the supplier. Often you find that on-site facilities are either erected or operated by the RMC suppliers.
What types of RMCs are manufactured by you? What are their advantages over site mixed concrete?
We have capability to produce all grades and also very high grade of concrete such as M100. Besides these concrete for special applications is also manufactured like - self compacted concrete, lightweight concrete, stamped concrete, self flow concrete, temperature controlled concrete, column concrete, slab concrete, foundation concrete etc.
Advantages over site mix concrete:
• The RMC plant involves an automated and computerized process to manufacture a quality product by exercising control over every step and on mixing of all ingredients (quality raw materials). In case of site mix concrete (SMC), there is lack of control on mixing of input materials, which may result in a poor quality output.
• SMC operations typically run into 2-3 kg wastage per 50 kg cement due to poor storage of raw materials, which is not the case for RMC.
• SMC is a labour-intensive operation and managing labour is a hectic task. Use of RMC lowers dependency on labour and this also benefits developers through optimisation of costs.
• Production at the RMC plant ensures faster production. While production output from site mixed operation requires 8/12 mixer to produce 4-5Cu.m./hr,a single RMC plant (60 cu m per hourr) can generate output of around 45 cu m per hour. Thus, RMC offers ten times better yield than SMC, resulting in optimisation of time and costs for clients.
• Usage of RMC is eco-friendly, as the raw materials are mixed at the plant, which reduces air pollution in and around the worksite.
How do you maintain your quality standards of the concrete produced?
First of all we adhere to the Indian norms and produce IS RMC 4926 and have all the processing, quality management and all the other integrated systems in place. On the production side, we have a life quality system which keeps a check on the minutest change in the quality. The raw materials also are thoroughly tested so these are the few things we do to keep a check on the quality.
ACC was planning to have a clinker production in east India, how is the progress?
It is not easy to set up a cement plant since it goes through a lot of processing and there are times that it takes years to set up the same due to government clearances. However we expect the plant to get commissioned by mid 2014.
What support do you require from the government on the policy level?
Intervention is required on a number of fronts to ensure consistent quality concrete. I believe that there is a role to play by a number of parties which could change the way that the RMC industry is potentially heading and in turn shall have a positive effect on the quality of materials supplied in Indian buildings and infrastructure.
• The first area would be the consistent application of taxes for site based mixing and RMC.
• The second would be clearing the confusion in the application of excise for an on-site based production unit or an Off-Site RMC Production unit by applying the same rates or none at all. By doing this there would be clearly no tax or excise advantages for on-site mixing and only commercial or logistical issues would remain as the choice whether to use RMC from off site or have an on-site facility. If this is thought through and correctly applied, revenues could actually increase for the government.
• The third area is the adoption of a recognised and impartial regulatory scheme for quality in production and delivery of RMC for all concrete supplies into public works and private concrete specifications. The current scheme operated by RMCMA is one which is self regulatory and although non-members can apply to be certified against the scheme, it is industry led and therefore can be perceived as not being impartial. However, QCI (Quality Council of India) have now taken on ownership of this scheme and it is now a totally impartial multi-stakeholder quality scheme which can be used as the standard specification in all works requiring quality concrete. Where the scheme has been specified, producers of concrete would have to have their plant certified in order to supply concrete to that site. Certification would be carried out only by separate independent certifying bodies with the correct credentials for doing so. This totally impartial quality scheme shall be managed by a multi-stakeholder committee with representation from government or government agencies, industry bodies, user organizations, academic bodies and any other related interests like certification bodies. This type of scheme is at the forefront of best available and applied quality processes in the world and shall result in quality concrete being delivered to our buildings and infrastructure in India. The scheme shall be operational in early 2013.
How different are the international norms of producing concrete as compared to the Indian standards?
I would say that the international quality standards are much different as compared India. For producing concrete internationally you need to have a lot of certifications in place and must a quality certification. If a company is found producing or introducing something wrong in the market, they lose their license not only in that particular country but all around the world. The problem in India is that one cannot get finished products. The biggest example was during the Common Wealth Games in Delhi, when we had incidents like the bridge collapsing.
What trends are you noting in the demand for RMC equipment? What is triggering these trends?
With increasing usage of high quality RMC for normal to critical projects, equipment manufacturers are building many customised and innovative products (mobile plants, small-sized plants/ small foundation, long boom pumps etc.).
What does ACC have to say on the issue of cartelisation?
We obviously refute the allegations. Also we have produced all the evidences in the court and are waiting to hear from them in December. That's all I say right now.

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