WORLD CLASS IN ALL SPHERES INDIAN CEMENT INDUSTRY

By

N.A. Viswanathan Secretary General

CEMENT MANUFACTURERS’ ASSOCIATION

Overview on

The Indian Cement Sector

and its Changing Coal Requirements

India in Globe

Second Largest Cement Producer in the

World, after China.

State-of-Art Cement Technology.

Low Energy Consumption.

Produces Cement comparable to World

Standards.

Green and Environment-Friendly Industry.

Contributes significantly to CO2 emission

reduction and thereby taking care of issues

concerning Global Warming.

Per Capita Cement Consumption at 202 kg is

very low against World Average of 513 kg.

FROM MODERATE TO WORLD CLASS INDIAN CEMENT INDUSTRY

Industry’s Initiatives and Achievements acknowledged and appreciated world over - although, a lot still remains to be done with the help and support from Government

1

1982 – A ‘Watershed’ in the

history of Indian Cement

Industry when ‘Partial

Decontrol’ was introduced

culminated to Decontrol in

1989.

Drastically compressed

time for adding additional

100 Mt. cement capacity

mark to 11 and 3 years

respectively from 83 years

taken for the First.

2

BURGEONING GROWTH

INDIAN CEMENT INDUSTRY

0

200

400

600

800

1000

1200

1400

1600

14-15 82-83 96-97 07-08 10-11 2016(Tar.)

2022(Est.)

0.0

1

23

.30

76

.22

17

4.3

1

22

8.3

0

40

7.4 7

10

0.0

1 33

.51

10

5.6

8 20

9.2

0

32

3.2

0

47

9.3

81

1.4

Mt.

Capacity

Production

19

India Produces 7% of Global Cement Production.

Of late, subdued cement demand has significantly lowered capacity

utilization – A major cause of concern.

GREEN AND ENVIRONMENT-FRIENDLY INDIAN CEMENT INDUSTRY

Adopts Latest Technologies to keep it globally competitive in respect of :

Production Cost (However, high taxation and import of inputs negate it).

Protection of Environment in and around cement plants.

Strives significantly for maintaining our Ecological balance being disturbed through Global Warming.

Takes notable initiatives and measures for Clean Development Mechanism through increased clinker substitution and Alternative Fuels use.

3

Still a Lot of Scope for Further Improvement

Proactive Cement Industry constantly improves Energy Consumption.

Some plants have become global benchmarks in energy consumption, next to Japan.

4

TOWARDS TECHNOLOGY & ENERGY EFFICIENCY


99% Energy Efficient Dry

Process plants.

Year

1950-60 1970 1980 1990 Post 2010

Kiln Capacity

(Tonnes/Day) 300 - 600 600 – 1200 2400 – 3000 3300 – 6000 4500 – 12000

Heat Consumption

(Kwh/Tonne Clinker) 1300 - 1600 900 – 1000 800 – 900 650 – 750 650 – 750

Power Consumption

(Kwh/Tonne Cement) 115 - 130 110 - 125 105 - 115 95 - 106 70 - 90

Perform, Achieve and Trade (PAT) Scheme of BEE @

Alternate Fuel and Raw Material (AFR)

Waste Heat Recovery (WHR) through Co-generation

5

NEW INITIATIVES FOR ENERGY EFFICIENCY


Energy consumption likely to be reduced further by 4.8% in first cycle of PAT

Scheme, ending in 2015

@ Outlined under the National Action Plan on Climate Change released by

Hon’ble Prime Minister of India in June 2008.

By adopting best available Technologies and Environmental practices in the plants viz. Waste Heat Recovery Power Projects and Uses of Alternate Fuels - Pet coke, Lignite, Husk, Municipal Wastes, Biomass, etc.

CO2 emission level reduced from 1.12 tonne of per tonne cement produced in 1996 to 0.719 tonne CO2 emission for one tonne of cement in 2010.

Is on the top in Certified Emission Reductions Projects registered with the Clean Development Mechanism (CDM) of Kyoto Protocol.

Indian roadmap now outlines a low-carbon growth pathway for the Indian cement industry that could lead to carbon intensity reductions of 45 per cent by 2050.

6

APPRECIABLE REDUCTION IN CARBON FOOTPRINT


These reductions could come

from increased clinker

substitution and alternative fuel

use; Improvements to energy

efficiency, and the development

and widespread implementation

of newer technologies.

CONSCIOUS OF ENVIRONMENTAL HEALTH AND SAFETY


Consumes around 27% of Fly Ash generated from

Thermal Power Plants.

Consumes almost 100% Slag generated by Steel Plants.

Eco-friendly use of hazardous industrial wastes

by focusing and producing Green Cement.

7

OPC, 31.62

PPC, 61.19

PBFS, 6.87

Others, 0.25

2010-11

OPC

PPC

OPC, 62.02

PPC, 26.18

PBFS, 11.05

Others, 0.75

2000-01

PPCOPC

OPC, 69.68PPC, 19.4

1

PBFS, 10.4 Others, 0.59

1990-91

PPC

OPC

Promotes Environment-Friendly Cement

Concrete Roads and White Topping in place

of Bitumen Roads, in which significant

emission of particulate matter, sulphur

dioxide are emitted through

Hot-Mix plants while preparing bitumen mixes

at construction sites.

TAKES MEASURES FOR ENVIRONMENT PROTECTION BEYOND ITS

SURROUNDINGS


Cement Road

Prolongs life of quarries and mines as

Cement Roads consume less

aggregates.

Protects ambient temperature from

increasing due to reduced absorption

of heat .

Bitumen Road

8

Utilizes fly ash upto 35%, disposal of which is a nuisance and health hazard.

Conserves 10% electricity used for street light

Conserves 14% Diesel and Petrol for Trucks plying on Cement Concrete Roads.

Developed green belts around

cement plants through social

forestry

Quarried mines converted into

water bodies, reservoirs, etc.

9

CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES INDIAN CEMENT INDUSTRY

Provide clean environment, health

care and education facilities to

workers and surrounding populace.

Adopted more than 700

neighbourhood villages surrounding

plants.

– Basic education, Primary Healthcare, Water

supply ensured.

– 225 Primary and Secondary Schools

established.

25 Colleges financed. Water Conservation

10

CLEAN ENVIRONMENT AND SOCIAL COMMITMENT INDIAN CEMENT INDUSTRY

Greenery Around Cement Plant

Thick rows of trees at a cement plant’s

perimeter Bulwark against GHG Rain water harvesting in Limestone Mining pits

Mined out areas converted into lakes by cement plants. SIBERIAN Birds certify Our

eco-friendliness

MAJOR CONCERNS

Updation of Database a casualty

Logistics, Despatches, etc. plans severely impacted after CCI’s

Order of 20th June 2012

Dropping Capacity Utilisation (from 90% to 70% now)

– Sluggish Demand

Coal Conundrum

Increasing Input Costs – Coal, Slag, Pet Coke, etc.

High Taxes and Levies

High interest rates making difficult for manufacturers to put up

new capacities as well as construction industries to fund their

new projects

11

TODAY FOCUSING ONLY ON COAL SCENARIO

Status of Indian Coal

India is the third largest coal producer.

It has fifth largest coal reserves Total reserves - 293 billion tonnes

(as on 01.04.2012) - Including Proved reserves up to the depth of 1200 m - 118.14 billion tonnes (as per Geological survey of India)

it is not able to meet domestic demand.

India is likely to become the second largest importer of coal next to Japan.

China USA

12

Breakup of Coal Demand by the User Industries

It is ironical, cement which is equally as important as power for growth of country’s economy gets only 1.75% of its 5% requirement of coal production

72% 7%

5%

16%

Power Utilities &Captive Power Utilities

Steel and Sponge

Cement

Chemical, Textiles,Fertilizer and E-auction& others

Power

13

(Fig in MT)

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2016-17

CIL 379.46 403.74 431.26 431.32 435.84 452.0 615

SCCL 40.60 44.54 50.43 51.33 52.21 56.00 57.00

Captive 21.17 29.87 35.03 34.60 36.24 32.00 100.00

Others 15.77 14.61 16.28 14.82 15.50 18.00 23.00

Total

Production

457.00 492.76 533.00 532.07 539.79 558.00 795.00

Demand 504.29 549.03 582.25 624.78 649.87 772.84 980.50

Gap 47.29 56.27 49.25 92.71 110.08 198.44 185.55

Domestic Coal Production and Demand

Mammoth mismatch – coal imports increasing significantly

14

Cement Sector - Third Largest

Consumer of Coal /Fuel

Coal is used as the main fuel in the industry.

Coal is supplied to cement companies on the basis of

Fuel Supply Agreement (FSA) between Coal

Companies and Cement Companies, at a 35% higher

price than the Regulated Sector (G6 to G17 – The

grades preferred by Cement Industry) of power grade

coal, consisting of Power, Fertilizer and Defence.

Coal availability to the industry dropped to 35% in

2012 from 75% in 2003.

15

16

Steep Declining Trends in Coal Supply to

Cement Industry

Source: CMA Data of Member Companies

Shrinking Coal Availability

Usage of AFR and WHR by cement industry become inevitable to meet Growing

Cement Production Target

0

10

20

30

40

50

60

70

80

FY 03 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12

Linkage coal imported coal pet coke

35%

32%

16%

Coal supply through linkages steeply dropped to 35% in FY13, compared to 75% in FY03.

No coal linkage to new capacities/expansions.

Open market./import of coal enhances its cost by 60 to 80%.

0

10

20

30

40

50

60

70

80

FY 03 FY04 FY 05 FY 06 FY 07 FY 08 FY 09 FY10 FY11 FY12 FY13

Linkage coal imported coal pet coke

Data based on CMA member companies

35%

31%

17%

75%

Procurement of Fuel by Members of CMA

Year

Linked

Coal

Imported

coal

Coal

procured

from

open

market

Pet

coke

Lignite

&

Other

Fuel

Total Fuel

procurem

ent

% of linked

coal against

Total

procurement

2002-03 13.34 3.66 0.77 1.04 0.05 17.87 75

2003-04 13.35 3.18 1.03 1.41 0.11 19.08 70

2004-05 14.84 3.63 1.27 1.87 0.76 22.37 66

2005-06 14.81 3.40 1.55 2.16 0.82 22.74 65

2006-07 14.43 4.96 2.94 2.09 0.83 25.25 57

2007-08 14.56 6.08 5.00 2.27 0.93 28.84 50

2008-09 14.29 6.97 6.17 2.41 0.36 30.20 47

2009-10 10.79 6.95 4.36 3.92 0.23 26.25 41

2010-11 11.90 8.48 4.92 3.18 0.36 28.84 41

2011-12 10.45 9.39 4.51 4.70 0.75 29.80 35

2012-13 10.38 9.27 3.93 5.18 1.06 29.82 35

Fig. in MT

17

Year Cement

Capacity

Cement

Production

2011-12 336.1 246.7

2012-13 349.6 272.0

2013-14 374.9 299.9

2014-15 405.1 332.1

2015-16 440.6 367.8

2016-17 479.3 407.4

2021-22 811.4 710.0

2026-27 1379.9 1237.4

ESTIMATED CEMENT DEMAND PROJECTIONS

FOR THE 12TH PLAN

BY WORKING GROUP OF PLANNING COMMISSION

(Mn.t.) High Scenario

18

Cement

Production *

CPP Total

2011-12 246.7 41.8 16.2 58.0

2012-13 272.0 46.2 17.8 64.0

2013-14 299.9 51.2 19.6 70.8

2014-15 332.2 56.5 21.7 78.2

2015-16 367.9 62.5 24.0 86.5

2016-17 407.4 69.3 26.6 95.9

Coal RequirementYear Cement

Production

(Mn.t.)

Source: Working Group Report for XII Plan

COAL REQUIREMENT TO MEET

CEMENT DEMAND PROJECTIONS

* 17% Coal is consumed to produce one tonne of cement

(Progressively reduced from 25% in 1990s because of efficiency improvement)

19

Coal - Key Issues

Substantial new capacities have been waiting for

sanction of Long-Term Linkages for more than six

years. This needs to be expedited.

CIL has switched over from Useful Heat Value (UHV)

to Gross Calorific Value (GCV). Wide variations

between declared GCV to actual GCV in cement

plants causing huge financial losses to coal

consumers.

Facility of joint sampling at both loading and

unloading points being extended to the power

utilities may also be extended to the cement sector

without embargo of 4 lakh tones subject to their

consent.

20

Coal - Key Issues

As per The New Coal Distribution Policy (NCDP) FSAs

have been signed only for 75% of normative requirement,

thus there is ab-initio 25% less programmed for each

unit.

Threshold for penalty for short supply being 60% only,

actual supplies could come to around 45% of normative

requirement.

Substantial cement production capacities have been

added during the last few years, but the FSAs are yet to

be signed for these capacities. Matter is pending with

Coal Cos and MOC.

Contd...

21

Under E auction any entity (irrespective of actual user, trader

etc) can participate. It is experienced that the traders are able to

get substantial quantities of coal under E auction which is then

sold to actual consumers.

This unnecessarily increases cost of coal for actual

consumers.

Only actual consumers be allowed to participate under

E-auction with some mechanism for monitoring which may

include self declaration & stringent action on diversion of

coal etc.

Coal companies are deducting FSA quantity (deemed supply)

based on fixed weight per wagon(66MTX59 Boxes) whereas

actual loading is up to 5%to 7% lower.

This results into loss of linkage quantity.

Contd... Coal - Key Issues

FSA quantity supplied is to be considered based on actual

loading & shortfall be supplied at the end of the year by

allotting rake or by road if quantity is less than a rake.

22

Joint inspection for re-verification of the calibration of

the rail/road weighbridges be undertaken at a fixed

interval with prior notification to the consumers.

Weighbridges of C.I.L. or railway are not always kept in

calibrated condition, erratic weights are part of the

deal.

Railways are charging freight on the basis of declared

carrying capacity of wagons (which has been periodically

increased in last few years), whereas actual quantity

loaded is lesser than carrying capacity declared.


Railways to Charge freight for 66 M.T./Box - whereas Qty. possible

to load – 63 M.T. Consumer has to pay idle freight of 3 M.T.

23

Steep Penalty on overloading of coal by Rail is charged

from consumers despite their not having any role in the

loading of coal which is done by coal companies &

Railways.

Penalties are worked out based on in motion weigh

bridge of Railways which do not measure correct

quantity of coal loaded in the wagons.

During monsoon season, weight of coal get increased

due to rains in transit with higher moisture over which

cement plants have no control.


Need to eliminate this penalty. Joint inspection for re-verification of

the calibration of the rail/road weighbridges be undertaken at a fixed

interval with prior notification to the consumers.

24

Cement Sector is already paying 35% higher

price for coal compared to the regulated coal

price of the power grade coal falling between

G6 to G17 grades.

This compulsory imposition of 25% of higher

grade of coal falling between G1 to G5 together

with the coal produced from the ‘Cost plus

Mines’ whose price is much higher than the

notified price of coal as pre condition for

signing of FSA should be dispensed with.


25

Provides a link between the Industry and

Govt. and also serves the cement

industry and its consumers.

Plays a pivotal role in formulation of

Government policies for cement

industry through continuous dialogues

and interactions.

Apprises industry of latest Technological

Developments and Cutting Edge

Technologies.

Educates on rational use of cement

including choice of the right type of

Cements for various applications.

Creates awareness on the industry’s

efforts on Quality Assurance,

Environmental improvements, Consumer

protection and other related issues.

26

ABOUT CEMENT MANUFACTURERS’

ASSOCIATION (CMA)

Thank you

27

Documents

WORLD CLASS IN ALL SPHERES INDIAN CEMENT INDUSTRY