About 80 units have closed their plants in the past 6 months
While large enterprises are growing at a steady pace, the small cement manufacturing units are in no mood to continue their businesses. Due to internal as well as external competition among major players and unviable raw material costs, more than 80 per cent small cement manufacturers in Gujarat have shut down their units.
According to industry sources, the small cement manufacturers are unable to survive amidst competition from bigger players and as a result about 80 units have closed their plants in past six months.
Apparently, plants with capacity less than two million tonnes are classified under the mini cement plants category.
With major players like Ambuja, UltraTech, Sanghi, Jaypee and Digvijay have their units here in Gujarat, the total installed capacity in the state is well over 13 million tonnes.
"Raw materials like limestone, petroleum coke prices have risen by 30-40 per cent in past two years and as a result production costs have gone up by 30 per cent. As a result, gap in cement prices of large players and smaller ones also decreased," said Pravin Patel, managing director of Pyramid Cement Privet Limited and former president of Mini Cement Plant Association of Gujarat.
Internal competition has also been a riding factor currently. About five years ago there were only 15 mini cement plants in Gujarat but over a period of time several new plants got commissioned which has created unnatural competition within the industry, said Patel.
Amit Vachhani, who had his own cement factory, has moved out of the cement business to stock market.
"Some manufacturers tone down the quality of cement which results in loss of face for overall small players. Moreover, high prices of raw material has also increased the production cost," said Vachhani.
Having closed down units, the smaller cement players have switched over to other businesses like real estate and engineering.
According to industry sources, with the global meltdown and the Dubai World Crisis impacting exports of large cement players, their products found route into the domestic market, thereby competing with the smaller ones. "Now, there is only a marginal difference of Rs 10 to 15 per bag between the product of the big plants and those from the smaller units. Needless to say, consumers are snow going for the bigger brands. Currently, overall demand of cement has declined with construction work slowing down during monsoon. Add to that, production capacity and supply is currently higher than the demand which has resulted in reduction of cement prices. This has been quite damaging for us in the recent times," said Patel.
Gujarat has about 100 small cement manufacturing units, with each unit having production capacity of 100-150 tonnes per day. The small units provide employment to more than 10000 in the state.
