In Gujarat and Rajasthan, many small players such as DLF Cements, Prism and others, caught in the cross fire of a major battle of supremacy raging between L&T and Gujarat Ambuja Cements, are finding the going very tough. The default rate in that region is estimated to be high with cement being sold for as lowas Rs 80 to Rs 90 per bag of 50 kgs there.

In the South too, the situation is deteriorating though it is not as bad as in the North. Andhra Pradesh is the worrying part where the prices are currently ruling at Rs 95 to Rs 100 per bag. The decline is basically due to additional capacity build-up in the state in the last one year which saw L&T and India Cements putting up new capacities and Zuari increasing its capacity.

In Tamil Nadu and Kerala, the prices are ruling at a relatively comfortable level of Rs 145 though it is much lower than Rs 175 levels realised last year.

Despite the price advantage in the South many manufacturers are finding it difficult to generate adequate cash flows to pay the lenders. Chettinad Cements is said to be seeking more time for paying its dues while Madras Cements, which till a few months ago was not even utilising its cash credit facility, is reportedly close to exhausting its working capital limits. India Cements, which is presently overstretched on the debt front dueto acquisition, is also in no better shape.

The last two months saw manufacturers in the South working at higher capacity utilisation. India Cements, as per CMA figures, has increased its capacity utilisation to over 100 per cent in December and January as against the average of 88.38 per cent during April-November. Madras Cement has also pushed capacity up from 90 per cent to 108 per cent while L&TŐs Tadpatri plant stabilised fully to hit peak capacity. While the companies are managing to despatch their entire produce, the market is unable to pay for it in time thereby affecting their cash flows.