State chief secretary P Subrahmaniam told The Financial Express here on Thursday that the government has agreed to provide 1,700 hectares to the company to set up an environment-friendly plant. "GACL, which preferred Maharashtra to Harayana has faith in the local police and administration to ensure law and order in the naxalite-infested area," he added.

Subrahmaniam said that the Bhadravati formula for payment of compensation in land acqisition will be implemented for GACL. Here, Rs 1 lakh, in addition to the stipulated land price, will be given to the original owner at the time of land acquisition.

With the commissioning of this project, the overall cement production in the state will go upto six million tonnes against a requirement of 10 million tonnes.Apart from ACC and Larsen & Toubro, there are small and medium cement manafacturing companies in the state.

The company officially communicated its decision in this regard at a meeting convened by chief minister Manohar Joshi here on Wednesday and attended by Subrahmaniam, industries secretary Yashwant Bhave, development commissioner Jayant Kawle and senior company officials.

The project will come under the "large" category and entitled for various fiscal incentives. The company will be exempted from sales tax payment for 18 years and there will be no electricity duty.

State government sources said that the company, which posted a profit of Rs 132 crore in tough conditions in 1997-98, may raise funds through internal accruals and funding from financial institutions.

Total production during the year was 50.49 lakh tonnes, up from 41.03 lakh tonnes in 1996-97 and sales 5.06 million tonnes against 4.09 million tonnes. In its principal market of Gujarat, sales went up by 56 per cent taking GACL's shareto 26 per cent from the previous year's 21 per cent.

In Mumbai, the company increased its sales by 48 per cent, making it the number one brand in the country's largest cement market. In Punjab and Himachal Pradesh, market share increased to 30 per cent.

The company is believed to have told the state government that demand for cement would increase with the central and state governments' declaration of housing as a thrust area and the abolishment of the Urban Land Ceiling Act. GACL has told the government that the cement industry is destined to consolidate its growth impulses in the coming years with accent on productivity, low capital costs, operational efficiency and consumer preference.

INSIGHT
Sops are attractive

The sops given to Gujarat Ambuja Cements are attractive but the main problem is that the plant is being set up in an area where naxalite activities continue. Further, the supply demand situation in Maharastra, while looking attractive on paper, is in reality not so sincemost of the gap is filled by Gujarat and MP which are saddled with huge overcapacities. Also, with L&T setting up a port in Maharashtra, the company will be increasing its imports in the state. Even though Gujarat Ambuja has shown interest in setting up the plant in Chandrapur, the chances of cement consumption increasing in that area is doubtful. Thus the cost involved of transporting the material will again act as a dampener.