To moderate elevated cement prices, the government is in talks with companies from Southern India, who have underutilised capacity and can ramp up production to cater for states facing a shortage.
Sources in the southern cement industry said with the logistic support promised by the government which will reduce transportation costs, they would be in position to increase supplies to the regions facing a deficit of the building material, as eve as the construction sector is looking up.
The southern cement industry isn’t seeking any fiscal incentive but asking for steps to keep logistics costs at reasonable levels. “Talks are also on to see if the supplies (from Southern India) can be made through the sea route, if transportation on rail or road is expensive,” said a government source.
After finance minister Nirala Sitharaman announced the logistic suppport mechanism on Saturday, discussions have been going on among the ministries concerned and the Railway Board to hammer out a solution for movement of surplus cement from the south to deficit regions.
“The government had asked for some information from southern cement sector and it has been shared. We are waiting for the measures to improve the availability of cement and through better logistics to reduce the cost,” the sources told FE.
South Indian Cement Manufacturers’ Association ( SICMA) led by its president N Srinivasan, vice chairman & MD, India Cements had been raising the issue of moving the surplus cement by the southern manufacturers to the deficit states.
South India with 180 million tonnes per annum ( mt) capacity accounts for almost 40% of India’s cement production. Around 40 % of limestone desposits, the key raw material, is found in South India. Other parts of the country, such as North, Central and East India could become deficit in cement production in a few years due to input shortage. Some regions are already deficit in cement production.
“Unless this cement moves north, we will always have a problem of shortage in the north. The cement industry is being blamed for cartelizing but what can we do as cement cannot be stored? If I store more than a certain amount of cement, we will be asked to be closed by the Ministry of Environment. Projects are being held up. Therefore, we have a real problem,” he had said.
The industry had asked the government to facilitate movement from the surplus Southern states to deficit regions by providing either telescopic railway freight or some other method.
According to a Crisil Research report cement prices rose in April again as cost pressures intensified. The surge in power and fuel costs, in turn, has raised the cost of road freight, which accounts for 50% of cement transport.