Mini cement plants (MCPs) were first conceptualised in the 1980s for the main purpose of tapping the scattered limestone reserves in the country. Setting up a large cement plant of minimum economic capacity of over one million tonne, with these scattered limestone reserves, was not commercially viable. This saw the birth of the MCP, with a capacity ceiling of 200 tonnes per day. As of 1999, there are 300 MCPs in the country, capable of producing nine million tonnes (mt) of cement, but actually producing only 6.8 mt. Although, MCPs were conceptualised to utilise scattered limestone reserves, most of them have sprung up in and around Andhra Pradesh, due to abundant availability of limestone in the state. Gujarat, Rajasthan and Madhya Pradesh follow in that order.

Pros...
The technology mostly used by the MCPs is the vertical shaft kiln technology, which was primarily designed in India especially for the MCPs. Incidentally, Kakatiya Cements and Deccan Cements use the rolling kiln technology that is used by large cement plants.

The main attraction of the MCP concept is the lower capital costs per tonne of capacity as compared to large plants. Against the requirement of Rs 3000 per tonne of capacity for large plants, capital costs for MCPs come to about Rs 1,000-1,400 per tonne. This reduces to a large extent the capacity charge per tonne of cement produced. Also, as the main market is in the vicinity of an MCP plant, savings are large on transportation costs. The MCPs also have an advantage where power is concerned. They require less units of electricity per tonne of cement produced as compared to large plants.

...and the cons
This, however, does not make them a brilliant bet. The mandatory small size of these plants makes them uneconomical. They also rely entirely on the state electricity boards (SEBs) for power supply, since small capacities do not support private generation facilities. Hence, though MCPs consume fewer units, due to the high cost of SEB power, their power costs are in line with those of large cement plants, or even higher in some cases.

Moreover, reliance on SEB power means that they are the first ones to suffer in a power-supply crisis that is so often experienced in India. Ironically, power crises are most acute in Andhra Pradesh, Madhya Pradesh and Gujarat, where the concentration of MCPs is the largest.

Oh! To make them viable
What probably affects them most is the lower realisation of cement as compared to large cement plants. This is basically due to the perceived inferior and inconsistent quality of cement the MCPs produce.

In order to make these plants viable, the Indian government has granted many concessions. During the eighties, when cement was subject to price and distribution controls, MCPs were allowed to sell at prices equal to those of the new large cement plants (prices that were higher than those allowed to the existing large cement plants). They were also exempt from distribution controls and were allowed excise duty rebate of up to 50 per cent for a period of five years from commencement of production.

With the industry getting fully decontrolled in the late eighties, most of the above concessions have disappeared. But the excise concession has continued -- MCPs are subject to an excise duty of only Rs 200 per tonne against the Rs 350 paid by large cement plants.

Still unviable they remain
Even with the excise concession, these plants have not made any significant inroads into the Indian cement market. One reason is that the quantity produced by these plants is extremely insignificant to give any real price competition to large cement companies. Moreover, the pricing of MCPs is not all that competitive due to their inherent limitations.