APPCB Takes Action Against Cement Companies

The scenario seemed bright for the cement companies with the departure of monsoon from major parts of India. The positive vibes was observed from the cement industry as most of the companies passed their input cost to their per bag cost by the end of June quarter 2013. Rise in demand was expected from rural areas because of good monsoon. 

But the sector took a fresh hit from Andhra Pradesh Pollution Control board (APPCB) which is a statutory authority, entrusted to implement environmental law and orders with the jurisdiction of State Of Andhra Pradesh, to close the factory of India Cements at Yerraguntla. Hence after the APPCB hearing on August 5, the electricity supply was disconnected from the facility of the company. 

APPCB has also initiated action against few more cement players in Kadapa district for not complying with the norms of the board. Bharti Cements was ordered to furnish bank gurantee for Rs 1.40 crore within a week and to implement water sprinkling system to reduce dust emission. APPCB has ordered Zuari Cements to forfeit Rs 10 lakhs from bank guarantee of Rs 1 crore and have even warned Dalmia Cements.

Such orders were issued after a series of complaints from Rayalseema Rashtra Samiti and others localities where it was found that Electro static Precipitators (ESPs) were not upgraded to control the flue gas emissions to meet board's prescribed standard. It was also noticed by the Board that there was improper storage of input materials which resulted in dust emissions to the road users. Moreover, there has been inadequate raw meal and clinker lump spread all over factory surrounding and water sprinkling system was poor.

The overall sales volume of the India cements is around 10.05MT at the end of FY13, out of this around 0.5 MT is produced at Yerraguntla factory. Even if we assume factory is closed for next eight month of FY14, the overall financial impact will be not more than 5% for the company. Although, closure will have a temporary setback, it will not have much impact in long term in the stock price of the India Cements.