By N.A. ViswanathanSecretary General

CEMENT MANUFACTURERS’ ASSOCIATION

Overview onThe Indian Cement Sector

andits 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 CLASSINDIAN 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

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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.

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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.)

0.01

23.3

0

76.2

2

174.

31

228.

30

407.

4 710

0.01 33

.51

105.

68 209.

20 323.

20

479.

3

811.

4

Mt.

Capacity

Production

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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. 4

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.

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TOWARDS TECHNOLOGY & ENERGY EFFICIENCY

INDIAN CEMENT INDUSTRY

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

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NEW INITIATIVES FOR ENERGY EFFICIENCYINDIAN CEMENT INDUSTRY

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 byHon’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.

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APPRECIABLE REDUCTION IN CARBON FOOTPRINTINDIAN CEMENT INDUSTRY

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 SAFETYINDIAN CEMENT INDUSTRY

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.

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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

INDIAN CEMENT INDUSTRY

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

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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.

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CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIESINDIAN 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

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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

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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.

ChinaUSA

India

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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 Utilit-iesSteel and Sponge CementChemical, Textiles, Fertilizer and E-auc-tion & others

Power

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(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

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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.

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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

YearLinked Coal

Imported coal

Coal procured

from open

market

Pet coke

Lignite&

Other Fuel

Total Fuel

procurement

% of linked coal against

Total procurement

2002-03 13.34 3.66 0.77 1.04 0.05 17.87 752003-04 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

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Year CementCapacity

CementProduction

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

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CementProduction *

CPP Total

2011-12 246.7 41.8 16.2 58.02012-13 272.0 46.2 17.8 64.02013-14 299.9 51.2 19.6 70.82014-15 332.2 56.5 21.7 78.22015-16 367.9 62.5 24.0 86.52016-17 407.4 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)

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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.

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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...

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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.

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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.

Contd... Coal - Key Issues

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.

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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.

Contd... Coal - Key Issues

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.

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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.

Contd... Coal - Key Issues

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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.

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ABOUT CEMENT MANUFACTURERS’ ASSOCIATION (CMA)

Thank you

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