JK Cement, UltraTech place bids for supplies to concrete road projects

Written by Timsy Jaipuria | New Delhi | Updated: Oct 22 2014, 06:44am hrs
Cement majors JK Cement and UltraTech are understood to have placed bids for supplying cement to the ministry of road transport and highways (MoRTH) for its plan to construct concrete cement roads.

According to sources, the two firms are among the first few to place their bids in response to the global tender floated by MoRTH for cement procurement for the next one year.

The tender, which will close on October 24, has invited companies to provide rates on per bag and per metric tonne basis for the next one year.

Road transport and highways minister Nitin Gadkari had stated his preference for concrete cement roads as opposed to bitumen.

The ministry is also considering entering into rate contracts with companies to buy concrete and cement so that builders and contractors can acquire the material at cheaper rates. Currently the cement rates range from R330 per bag to R390 per bag across the country and similarly, R33,000 per metric tonne to R39,000 per metric tonne.

In an interview to FE earlier, Gadkari had said that "the country now needs to shift focus on technology and better management practices which help us build safe roads, lesser cost of construction, faster implementation and longer life of highways with low or minimum maintenance. That is why we have decided to build rigid concrete roads instead of flexible bitumen roads. These concrete roads will be cheaper on life cycle cost compared to bitumen. To further bring the cost down we have called a global tender for cement rate contracts".

The ministry has been evaluating cost options for various projects to use concrete cement where there is a lower life-cycle cost, after which it decided to call for this tender, sources said.

Once the tender closes, the road ministry or National Highways Authority of India (NHAI), or a government procurement agency, could sign rate contracts with cement manufacturers and they will then supply cement at this fixed rate for the next one year to either NHAI for the government road projects or to companies which will be building highways on the BOT mode.

Typically in a rate contract, the price of a material is finalised in advance by the procurement agency and vendors. As and when the procurement agency or its arms require the product, the vendor supplies it at the agreed rate. This also involves commitment on volumes. Procurement of large volumes for national highway projects raises the possibility of discounts.

Usually, concrete cement roads cost less than bitumen surfaces on a life-cycle basis (over a 20-year period). Though the initial outlay on concrete roads is higher, the maintenance costs are less, said a government official.

In bitumen roads, the reverse is the case. Depending on various factors, including the location of the road, the initial cost of building a concrete road could be higher by 5-30%. On the other hand, the bitumen roads have a lower life-cycle costs and the private developers managing long-term (20-30 years) projects have so far avoided building concrete cement roads. The exceptions include those who won the rights to make six-lane roads out of four-lane ones built with concrete cement.