Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 5901-IN

STAFF APPRAISAL REPORT Public Disclosure Authorized

INDIA

CEMENTINDUSTRY PROJECT

Public Disclosure Authorized December 23, 1985 Public Disclosure Authorized IndustryDepartment

Thisdocument has a restricted distribution and may be used bv recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS

US$1 Rs 13.0 Rs 1 US$0.077 Rs 1,000 US$76.92

FISCAL YEAR

Goverment: April I - March 31 Companies: Birla, CCI, ICL - April 1 - March 31 KCP - July 1 - June 30 ACC - August 1 - July 31

WEIGHTS AND MEASURES

1 metric ton (ton) = 1,000 kilograms (kg) = 2,204 pounds 1 milligram (mg) = 0.001 gram (gm) = 0.015 grain 1 liter (1) = 61.02 cubic inches = 1,057 quarts 1 kilometer (km) = 1,000 meters = 0.621 mile 1 meter (m) = 1.0936 yards = 39.37 inches I cubic meter (m3 ) = 35.31 cubic feet = 264 US gallons 1 square meter (m2) = 1.196 square yards = 10.76 square feet I hectare (ha) = 10,000 square meters = 11.960 square yards I MVA = 1,000 KVA I MW = 1,000 kW I kcal = 1,000 Cal = 0.2519 BTUs FOROMCIAL USEONLY

ABBREVIATIONS AND ACRONYMS USED

ACC - Associated Cement Companies AP - Andhra Pradesh Birla - Birla Jute and Industries, Ltd. CCI - Cement Corporation Cembureau - Association of European Cement Manufacturers CMA - Cement Manufacturers' Association CRI - Cement Research Institute of India DEA - Department of Economic Affairs FOB - Free on Board FOR - Free on Rail GDP - Gross Domestic Product GNP - Gross National Product Government (GOI) - Government of India HLC - High Level Committee on the Cement Industry ICB - International Competitive Bidding ICICI - Industrial Credit and Investment Corporation of India ICL - India Cements, Ltd. IDBI - Industrial Development Bank of India mOI - Ministry of Industry HP - Madhya Pradesh NCAER - National Council of Applied Economic Research, Delhi NPC - National Productivity Council OPC - Ordinary Portland Cement PPC - Pozzolana Portland Cement PSC - Portland Slag Cement SDC - Shree Digvijay Cement Co. Ltd. STC - State Trading Corporation TPD - Tons per Day TPY - Tons per Year UP - Uttar Pradesh WG - The Working Group for the Cement Industry, Seventh Plan

This dooumnt ha a resticted disrbution and may be usd by reipients only in the perfomanc of tbir offca du*s. its contets nmy not otherwse be dilosed without World Bank authoion. INDIA

CEMENT INDUSTRY PROJECT

TABLE OF CONTENTS

Page No.

LOAN AND PROJECT SUMMARY ...... v-vii

Io INTRODUCTION ...... 1

II. INDIAN CEMENT INDUSTRY ...... 2

A. Historical Development ...... * ...... *. . 2 B. Present Structure of the Industry ...... 4 C. Prices, Costs and 'riability ...... 6 D. Key Subsectoral Issues ...... o ...... 8 E. Role of the Bank Group ...... 10

III. THE INDIAN CEMENT MARKET: DEMAND, SUPPLY, DISTRIBUTION AND PERICING ...... 11

A. General ...... 11 B. Apparent Consumption and Production ...... 11 C. Supply and Demand Projections ...... 14 D. Marketing and Distribution ...... 17 E. Cement Pricing ...... 0...... 18 F-. Imports ...... 0 ...... 0..... 19

IV. THE PROJECT .... o ...... 20

A. Project Objectives ...... 20 B. Project Description ...... 21 C. Project Management and Implementation ...... O... 27 D. Training and Manpower Development ...... o..... 28

V. CAPITAL COST, FINANCING PLAN AND PROCUREMENT ...... 28

A. Capital Cost ...... 28 B. Financing Plans ...... O.. 30 C. Onlending Arrangements ...... o...... 33 D. Procurement ...... 34 E. Allocation of the Loans and Disbursements ...... 35

This report is based on the findings of an appraisal mission which visited India from May 1-30, 1985. A follow-up mission in September completed the appraisal. It was prepared by Messrs. R. Venkateswaran, N. Fog, H. Herat and J.M. Soncini of the Industry Department. Mrs. S. Sengupta (NDO) contributed to the analysis of the Indian cement market and relevant chapter of the report and Mr. S-Z. Wu participated in the appraisal and contributed to the financial and economic analyses. Page No.

VI. FINANCIAL ANALYSIS ...... *.... 37

A. Assumptions Used and Forecast of Production Costs ...... 37 B. Financ -- Projections .*...... 38 C. Financial Rate of Return u...... 46 D. Financial Covenants, Auditing and Reporting Requirements 47

VII. ECONOMIC ANALYSIS ...... o...... 48

A. Assumptions Used ...... 48 B. Economic Rate of Return . 48 C. Other Benefits ...... 49 D. Major Risks ...... 49

VIII. AGREEMENTS REACHED ...... 51

ANNEXES

2-1 Size Distribution of Cement Plants ...... O..*...... 53 2-2 Regional Capacity Build-up ...... 54 2-3 Regional Production ...... 55 2-4 Statevise Distribution of Installed Capacity ...... 56 2-5 Statement of Intent on GOI Policy for Promoting Growth and Development of the Cement Subsector ...... 57 3-1 Statewise Cement Production ...... 59 3-2 Non-levy Cement Consumption in Selected States ...... 60 3-3 Statewise Demand, Production and Balance, 1984/85 and 1989/90 ...... 61 3-4 Price of Levy Cement, 1980-85 ... e...... 62

4-1 The Companies, Organization and Ownership ...... 63 4-2 ACC Madukkarai Project Description o...... 67 4-3 ACC Shahabad Project Description .so...... ** ...... 73 4-4 Birla Satna Project Description ...... 78 4-5 CCC M&ndhar Project Description ...... 83 4-6 ICL Sankarnagar Project Description ...... 89 4-7 KCP Hacherla Project Description ...... 96 4-8 Technical Assistance to Cement Industry ...... 100

5-1 ACC Madukkarai Summary of Capital Cost Estimate and Financing Plan n*.*.* ...... 116 5-2 ACC Shahabad Summary of Capital Cost Estimate and Financing Plan ...... 117 5-3 Birla Satna Summary of Capital Cost Estimate and Financing Plan ...... 6-0-0...... 118 5-4 CCC Mandhar Summary of Capital Cost Estimate and Financing Plan ...... o ...... 119 5-5 ICL Sankarnagar Summary of Capital Cost Estimate and Financing Plan ...... 09...... 120 - iii -

Page No. 5-6 KCP Macherla Summary of Capital Cost Estimate

and Financing Plan .. S ...... 121 5-7 Disbursement Schedule ...... 122

6-1 Assumptions Used in Financial Projections ...... 123 6-2 Actual and Projected Production Costs at Each Plant ...... 128 6-3 ACC - Historical Financial Statements and Consolidated Financial Projections with the Madukkarai and Shahabad Proj ects ...... 129 6-4 Birla - Historical Financial Statements and Consolidated Financial Projections with the Satna Project ...... 133 6-5 CCI - Historical Financial Statements and Consolidated Financial Projections with the Mandhar Project .... o...... 137 6-6 ICL - Historical Financial Statements and Consolidated Financial Projections with the Sankarnagar Project ...... 142 6-7 KCP - Historical Financial Statements and Consolidated Financial Projections with the Macherla Project ...... 146 6-8 Financial Rate of Return Analysis - Cost and Benefit Streams by Conversion Subproject ...... 150

MAPS

IBRD 19204R Regional Distribution of Cement Production and Consumption in 1984185 IBRD 19205R Regional Distribution of Cement Production and Consumption in 1989/90 - iv -

SELECTED DOCUMENTS AND DATAAVAILABLE IN THE PROJECT FILE

A. Reports and Studies on the Cement Sub-sector

Al. IBRD India Cement Subsector Report, October 1980 (Report No. 3141-IN). A2. Miscellaneous Market and Sector Data (please also refer to data file contained in Al).

B. Reports and Documents on Companies and subprojects

B4.1 ACC Madukkarai Plant: Project reports including technical, geological and feasibility studies 4.2 ACC Shahabad Plant: Project reports including technical, geological and feasibility studies 4.3 Birla Satna Plant: Project reports including technical, geological and feasibility studies 4.4 CCI Mandhar Plant: Project reports including technical, geological and feasibility studies 4.5 ICL Sankarnagar Plant: Project report including technical, geological and feasibility studies 4.6 KCP Macherla Plant: Project report including technical, geological and feasibility studies

B5.1 ACC Madukkarai Plant: Reports and document pertaining to project capital costs 5.2 ACC Shahabad Plant: Reports and document pertaining to project capital costs 5.3 Birla Satna Plant: Reports and document pertaining to project capital costs 5.4 CCI Mandhar Plant: Reports and document pertaining to project capital costs 5.5 ICL Sankarnagar Plant: Reports and document pertaining to project capital costs 5.6 KCP Macherla Plant: Reports and document pertaining to project capital costs

B6. Financial Worksheets for: detailed production, cost benefit analysis, financial projections,economic analysis, historical financial data and annual reports for the years 1978/79-1984/85

B6.1 ACC 6.2 Birla 6.3 CCI 6.4 ICL 6.5 KCP -v -

INDIA - CEMENTINDUSTRY PROJECT

Loan and Project Summary

Borrower: Republic of India acting by its President, and, Industrial Credit and Investment Corporation of India (ICICI)

Guarantor: Republic of India

Amount: $165 million equivalent to the Republic of India, $35 million equivalent to ICICI

Terms: Standard

Onlending Terms: (i) US$163.5 million equivalent from GOI to ICICI and Industrial Development Bank of India (IDBI) in equal proportions for carrying out Part A (major conversions) and Part C1 (technical company level assistance and training) of the Project. Repayment from ICICI and IDBI to GOI based on fixed amortization schedule over 20 years with grace period not exceeding 5 years. Interest rates: - standard GOI rates of interest for loans to financial institutions, currently set at 10.25% per annum; Foreign exchange risk to be borne by GOI. Terms of subloans under Part A to be as follows: - standard ICICI and IDBI fixed interest rate on rupee loans, currently set at 14%. - repayment terms not to exceed 13 years following subloan signature, including up to 4.5 years' grace period. (ii) $1.5 million equivalent provided by GOI as non-reimbursablegrant to ICICI for carrying out Part C2 of the project (subsector level training and technical assistance). (iii) $35 million equivalent for Part B of the Project (line of credit for smaller-scalemodernization) relent to subborrowerson standard ICICI credit terms varying from 7-10 years repayment and up to two years' grace period, interest rate at variable IBRD rates to ICICI plus spread of 2% per annum. Foreign exchange risk to be borne by subborrowers. Project Description: The project would build on a successful dialogue between GOI and the Bank on cement subsector strategy and policy and support broadly the GOI thrust of liberalizationof - vi -

key productive subsectors. It will enable the cement industry to modernize its facilities, reduce operating costs, meet environmental standards, train operating personnel and generally improve its competitiveness in preparation for the intended policy of complete or virtually complete decontrol of pricing and output by the end of the Seventh Plan period in 1989/90. To this end the Project would assist six private sector cement plants (Associated Cement Companies' Madukkarai and Shahabad plants, Birla Jute and Industries Satna plant, India Cements Limited Sankarnagar plant, KCP's Macherla plant and Sri Digvijay Cement Co. Limited, Sikka plant) and one public sector plant (Cement Corporation of India's Mandhar plant), in a conversion from the inefficient wet process technology to modern dry process, precalciner technology (Part A). In addition, the Project would support smaller scale rehabilitation and modernization investments at other cement plants in need of improving energy efficiency,productivity and meeting environmental standards and in improving marketing and distribution systems (Part B). Finally the Project would support training programs, both at individual company levels (Part CO) and for the industry as a whole (Part C2), and provide technical assistance for project management, training and curricula development.

Benefits & Risks: The Project will allow the seven converted plants of six well-run, progressive and efficient cement producers to improve fuel efficiency by 42% on the average while increasing production by 46%. The seven plants will demonstrate to the rest of the industry the benefits of a well-designed application of modern technology. The pre-tax financial internal rate of return on the six conversion projects for which appraisals have been completed ranges from 18% to 37%; post-tax incremental financial rates of return are higher, and range from 22% to 45%, due to the substantial tax incentivesprovided by GOI for new investment. The seventh plant is also expected to show similar rates of return based on the preliminary estimates of costs and benefits. The other components of the loan will permit a number of other cement plants to carry out minor modernization and/or rehabilitationprojects and improve their performance in respect of energy efficiency, productivityand environmentalcontrol. The technical assistance component will encourage the cement industry to focus on and address the critical problem of training a sufficient number of plant operators in the skills required to operate the sophisticated modern cement plants. No specific risks are envisioned except those created by infrastructuralproblems such as rail service, coal and power supply which affect most sectors in India. - vii -

Estimated Local Foreign Total Cost: - (US$ million) (a) Parts A & C of the Project: -Base Cost (June 1985 Prices) 141.1 131.2 272.3 -Physical Contingencies 10.6 9.0 19.6 -Price Escalation 24.6 18.8 43.4 Total 176.3 159.0 335.3

-Interest during Construction 30.1 15.6 45.7 Total Financing Required (Parts A & C) 206.4 174.6 381.0 (b) Part B of the Project (Line of Credit) 52.3 36.5 88.8

Grand Total 258.7 211.1 469.8

Financing Plan: GOI and Other Project Sponsors 113.5 15.6 129.1 ICICI/IDBI & Other 133.3 7.4 140.7 IBRD Loans 11.9 188.1 200.0

Estimated IBRD FY 1986 1987 1988 1989 1990 1991 1992 Disbursements: (US$ million)

Annual 6.5 46.7 74.6 47.8 17.5 5.7 1.2 Cumulative 6.5 53.2 127.8 175.6 193.1 198.8 200.0

Economic Rate of Return: Ranging from 21% to 51% for the main conversion subprojects with an average rate of return of 25%

Staff Appraisal Report: No. 5901-IN, dated December 23, 1985

Maps: IBRD 19204R IBRD 19205R INDIA - CEMENT INDUSTRY PROJECT

I. INTRODUCTION

1.01 The Government of India (GOI) has requested % Bank loan of US$165 million equivalent to help finance the conversion of seven existing wet-process cement plants, of which six are in the private sector, to the modern dry process technology (Part A). In addition, GOI has requested a separate Bank loan of US$35 million to ICICI as a line of credit for smaller scale modernization investments in proven technology, energy conservation and environmental control at a number of other plants, mainly in the private sector (Part B), as well as finance a program of technical assistance and training to support technology transfer and development in the cement industry (Part C). Part A of the Project consists of the conversion of the following units: Associated Cement Companies (ACC) (Shahabad plant, Karnataka and Madukkarai plant, Tamil Nadu); Birla Jute Industries (Satna plant, Madhya Pradesh); India Cements (Sankarnagarplant, Tamil Nadu); KCP Ltd. (Macherla plant, Andhra Pradesh), and Sri Disvijay Cement Company Ltd. (Sikka plant, Gujarat), all in the private sector; and Cement Corporation of India (CCI) (Mandhar plant, Madhya Pradesh). An overall capacity increase of around 46Z would be achieved with the introduction of modern dry process technology.

1.02 Project financing requirements, including price escalation, contingencies and interest during construction, are estimated at US$470 million, of which about US$112 million equivalent would be in direct foreign exchange and about US$99 million in indirect foreign exchange. The Bank loan, therefore, would cover nearly 95% of the foreign exchange and 44% of the total financing requirements. The balance of US$270 million will be provided by term loans from the two major financial institutions, Industrial Credit and Investment Corporation of India (ICICI) and Industrial Development Bank of India (IDBI) and a blend of internally generated funds, new equity and convertible and non-convertible debenture issues.

1.03 Bank involvement in the Project arose from initial discussions with the Government in June 1979, and Bank missions in September and November 1979 to study the cement industry in detail. The major recommendations contained in the Cement Subsector Report (Report No. 3141-IN) with respect to improvements in pricing policies, energy conservation and modernization in the industry have been instrumental in promoting subsequent policy changes that have stimulated the large increase in private investment in the subsector. In June 1980, the Bank appraised a project comprising a major expansion in the public sector but processing was discontinuedwhen agreement could not be reached with GOI on the timing for the implementationof pricing policy reforms. However, following further discussions within the Bank, with GOI and the cement industry representatives,it was decided to move away from a concept involving only capacity expansion in the public sector to one of supporting already establishad plants in the private and public sectors in introducing measures aimed at energy conservation, improvement of the environment and cost reduction. Project appraisal was completed in May and September 1985. Staff from ICICI and IDBI participated in the appraisal.

II. INDIAN CEMENT INDUSTRY _/

A. Historical Development

2.01 Cement manufacturing is a well-established industry in India, accounting for about 3.5% of total production in the industrial sector. In 1984/85, the gross value of cement output (at selling prices less taxes and subsidies) has been estimated at Rs 18,900 million (US$1,588 million) representingabout 1.0% of the year's GDP at:factor cost. Cement sector employment in 1983/84, including those employed in the limestone quarries, was over 100,000 or around 1.2% of total employment in the organized industrial sector in India; employment in cement plants alone was over 70,000 or 0.8% of total industrial employment.

2.02 India's first cement plant was set up in 1914. The industry grew only slowly until the mid-1930s, when a policy of discriminatingprotection to incipient industries was enacted, thereby providing a stimulant for growth. As a result, the cement industry expanded rapidly and capacity reached 3.8 million TPY in 1950/51. This was followed by a period of accelerated expansion between 1950-69. The growth of the industry slowed down during the decade of the 1970s, when GOI's industrial licensing policy restricted the expansion of larger companies, and pricing policy failed to ensure an adequate return on investment. Between 1969/70 and 1973/74 (Fourth Plan), cement production capacity increased by about 5.7% per year. Output, however, grew at only 1.5% per year due to various infrastructureand input constraints - chiefly shortages of railway wagons, interruptionsin power supply and labor problems. Consequently, capacity utilization averaged only 74% during this period. Consequent to the first oil shock in 1973, the cement industry responded by increasing capacity utilization immediately thereafter. During the Fifth Plan (1974/75 to 1977/78), increases in the retention price of cement were initially inadequate to allow for a sufficient return on new investment and capacity growth stagnated at around 2.6% per annum. Although substantial price increases in 1975, 1977, and 1978 were enacted by GOI, capacity growth was initially slow and did not accelerate until the late 1970s. Production increases, however, averaged 7.2% per year due to higher capacity utilization (over 88%).

2.03 The end of the Fifth Plan marks a watershed in the development of the Indian cement industry. Changes in GOI pricing, output control and distributionpolicies have been particularly significant in stimulating rapid growth of the industry in the Sixth Plan period which started the decade of the 1980s. At the start of the current decade, a gap remained between potential and actual production due to poor capacity utilization in

1/ Recent performance and prospects of India's industrial sector is discussed in Report No. 5593-IN, -India - Structural Change and Development Perspectives,' dated April 24, 1985. - 3 - the industry, caused mainly by shortfalls in power availability ard labor problems. As a result, and compounded by excess and growing domestic demand, a significant black market emerged. Imports were canalized and prices and distribution fully controlled. However, the encouraging investment and production response to price increases in 1979 led to the dual pricing and liberal imports policy announced in February 1982. As a result, capacity and production increased further to the point where in 1984/85 there have been only nominal cement imports,2/ the black market has disappeared and market clearing prices, the so called "non-levy" prices have come down.

2.04 Installed capacity grew by nearly 10 a year during 1980-85, and nearly doubled from the level at the end of the Fifth Plan. Although over half the current installed capacity in the industry has been added since 1982, average capacity utilization declined to 72.7% mainly because of disruptions caused by declining coal quality, shortages of coal, electricity and rail wagon allotments, continuing maintenance and labor problems and the start-up of new or expanded units. In order to counteract the problems caused by interruptions in power supplies, the industry began to install captive facilities, particularly in conjunction with expansion and greenfield plants, and has sharply reduced its reliance on public power generation capacity. On the other hand, due to their age and mechanical condition, cement plants installed in the 1950s, and which still account for about 30% of the total installed capacity in early 1985, row have begun to experience lower capacity utilization and greater downtime. Problems associated with high ash coal and declining coal quality in general have become more acute in the older plants based on the wet or semi-dry process technology. This has underscored the urgent need for modernization by the industry as a whole.

2/ Imports peaked at 2.0 million tons in 1983/84 and dropped to 300,000 tons in 1984/85. -4-

Mab.e 2.1

lad - Cement Indstry Groth of Capacityand Productim

Arhmal Ankial Arnial Average Anmal Capacity Capacita Productiai Capacity Produtim End of Plan Growth End of Plan Utlzatim Gaeth P'nuYers a/ (MillinTans) (Z) (MillionTan) (%) (%)

First Plan (1951-56) 5.0 8.9 4.6 91.6 9.3 Sea)rd Plan (1956-61) 9.3 13.1 7.8 84.2 11.2 Th[rd PMan(1961-66) 12.0 5.2 10.6 88.2 6.2 Akzal Plans(1966-69) 15.0 7.7 12.2 81.7 5.0 Fourth Plan (1969-74) 19.8 5.7 14.7 74.2 3.7 Fifth Pln b/ (1974-78) 21.9 2.6 19.4 88.5 7.2 Sixth Pln (1980-85) 42.6 10.0 30.2 74.7 6.5 a/ Fisal years, startingwith 1950151and rendg with 1977/78. b/ The FifthPlan, covering the period frao1974/75 to 1978/79, was terminated in 1977078.

Soarcs: Wodding Grop for tbe Cement ITkstry, Seh Plan (W.), Higi Ievel CaomLttee on theCemnt IndutrLes(BIC) and ACC.

B. Present Structure of the Industry

2.05 At the start of the 1985/86 financial year, the Indian cement industry comprised 107 plants, of which there were 73 integrated plants, 1 clinkerization unit, 6 grJnding units, 1 white cement plant and 26 mini plants (i.e., clinker capacity less than 200 TPD) with a total ins lled capacity of 42.6 million TPY. About 58% of the total kiln capacity was based on the more energy-efficient dry or semi-dry processes, and the balance (in 34 plants) on wet process technology. Kiln sizes employed in the industry range from 30 TPD to 3,000 TPD; most plants are multi-kiln plants. At present, there are 15 plants which, through the use of multiple kilns, have annual cement capacities between 0.8 million and 1.6 million tons. At least another six 1-million TPY plants are under advanced stages of construction and are expected to go onstream by the late 1980s. At the end of the Seventh Plan, over 35% of installed capacity will be provided by 12% of the plants in the 1.0 million ton-plus category, and a further 39% of capacity by 212 of the plants in the 500,000-1,000,000 TPY category (see Annex 2-1). The average size of plants will increase from 535,000 TPY in 1984/85 to 650,000 TPY by 1989/90, despite a substantial increase in the number of mini plants (Annex 2-1).

2.06 The industry has been developed almost entirely by the private sector which accounted for 82% of installed capacity at the start of financial year 1985/86 (Annex 2-2), and for 86% of total cement production in 1984/85. Over 60% of annual output is controlled by a few major industrial groups, namely, ACC, various branches of the Birla House, the J.K. Singhania Group, Sahu Jain Group, Bangurs, and India Cements (Annex 2-3). Although the public sector'R entry into the industry goes back several years - the first such plant was built in 1938 - significant capacity was not added until the late 1960s and 1970s. At present, the public sector provides about 14Z of India's cement output (Annex 2-3) and is made up of the Cement Corporation of India (CCI), accounting for 6.6% of domestic output, as well as eight smaller State Government-owned companies. GOI has moved away from a deliberate policy of capacity expansion in the public sector and CCI, which had been expected to attain 25Z of total installed capacity by the end of the Seventh Plan, will not exceed about 9% (Annex 2-2). Mini cement plants employing mainly rotary kiln technology now account for 2.22 of total installed capacity and produced 2.1% of the 1984/85 output (Annex 2-4). About 68% of installed capacity is located in the South and West regions. The trend in the next five years is for further concentration of cement plant capacity in the states of Madhya Pradesh, Andhra Pradesh, Rajasthan, Gujarat, Maharashtra and Karnataka, mainly as a result of the extensive availability of limestone and the relative ease of coal supplies. Over 95% of new capacity will be added in the above states. Over 74% of installed capacity will be concentrated in the Western and Southern Regions (Annexes 2-2 and 2-4).

Table 2.2

India - Distribution of Capacity and Production According to Ownership, 1984/85 a/ (In millions of tons)

Capacity Z Production Public Sector Central Government 2.62 6.1 1.99 6.6 State Governments 4.96 11.7 2.26 7.5 Total 7.58 17.8 4.25 14.1

Private Sector ACC 9.37 22.0 7.61 25.2 Others b/ 25.67 60.2 18.31 60.7 Total 35.04 82.2 25.92 85.9

GRAND TOTAL 42.62 100.0 30.17 100.0 a/ Data as at April 1, 1985. b/ White cement plants and mini-plants are included in the private sector; they account for less than 2.2% of installed capacity. 2.07 In 1984/85, three major types of cement accounted for 98% of the total production: ordinary portland cement (OPC), 25%; pozzolana portland cement (PPC), 53%; and portland slag cement (PSC), 15% of output. Retention prices are nearly the same for all types of cement (para 3.13), and the market has not been very demanding of product quality. Moreover, as production costs are lower for PPC and PSC than for OPC, the share of production of PSC and PPC has increased over the past five years by 43% relative to OPC. This situation may be expected to change over the next few years as decontrol measures are implemented.

2.08 Along with the growth in the cement industry, India has developed substantial capabilities in cement equipment manufacture. At present, there are five large manufacturers of cement equipment and numerous small manufacturers supplying components. Together, these firms have the capacity to supply annually the major portion of equipment for plants up to a combined capacity of 3 million TPY, which is adequate to meet the bulk of the Indian cement industry's expansion plans over the foreseeable future. The largest plants delivered by the local industry to date include modern 3,000 TPD (approximately 1.0 million TPY) plants, although some sophisticated components and instrumentation systems (up to 20-25% of total equipment cost) still must be imported.

C. Prices, Costs and Viability

2.09 Cement prices have been subject to Government control. Under the dual pricing policy instituted in 1982, cement units (other than mini-plants) are required to sell a specified portion of their output at a fixed (levy) price; the remainder may be sold at the open market price. The levy quota has been based on a percentage of rated capacity with pre-1982 plants having to provide a higher share of their output as levy cement. The levy cement is itself dispatched to different regions of the country by a complex allocation process administered by the Office of the Cement Controller. A system of freight equalization operates in a manner to ensure a uniform levy price throughout the country, theoretically compensating the regions furthest from cement plants for the additional transport costs involved. The bulk of the levy cement allocations serve to meet the requirements of central and state governments. The levy cement retention pri_e (i.e. price ex-factory net of taxes and packing) was fixed at Rs 339/ton in 1982, when the dual pricing scheme was put into effect and it has been increased since then to Rs 379/ton. Retention prices (FOB plant) for the non-levy cement, i.e., open market sales, which reflected the scarcity of free sale cement in the early 1980s, have declined steadily from around Rs 800-850/ton in 1982 to around Rs 600-650/ton today. This drop in the free market price and the narrowing of the gap between the levy and free market prices have come about mainly as a result of increasing cement supplies in the open market. Stagnant government investment has also slowed the growth of levy cement purchases and has resulted in higher amounts available for sale in the open market. Imported cement in the coastal areas has recently been sold for about Rs 60/bag (i.e., Rs 1,200/ton) including duties and taxes, or Rs 878/ton net of taxes and duties. 2.10 The decontrol measuyes instituted by the Government in 1982 have been accelerated further in recent months and the levy 'quota' was reduced in June 1985 to 60% for pre-1982 plants and 40% for post 1982 plants. The basis for the quota has also been changed from rated (or licensed) capacity to actual production (see Annex 2-5). This change undoubtedly was aimed at halting the industry-wide practice of underrating plant capacity to ensure low volumes of levy cement and then operating the plant at greater than 100% of the nominal capacity. It is also expected to benefit older units now operating at below 75-85% of rated capacity ard unable to benefit from so called -sick unit" status 3/ for extended periods. GOI has confirmed that it intends to continue further reductions of levy quotas and changes in levy price to bring it on par with the market price in order to substantially achieve its objectives of enhancing efficiency, removing distortion with regard to production, distribution and consumption of cement and providing adequate incentives, through appropriate price structure and levels, for capacity expansion and plant modernization needed to develop the subsector to its full potential. GOI intends to achieve the above objectives substantially by the end of the Seventh-Plan period, i.e., by March 1990. This would also coincide with the expected completion of all project components and the coming on stream of all the converted plants under the Project.

2.11 India continues to be an economic producer of cement, despite steadily increasing capital costs of new installations and fuel and power costs. The 1985 investment cost of a one-kiln plant of 1 million TPY capacity is estimated at between US$90-120 per annual ton of cement in India compared to about US$170-200 internationally. This substantially lower investment cost in India is attributable to the high degree of domestic manufacture, fabrication, and installationof cement plants at competitive domestic labor rates, as well as to lower civil works and engineering costs. The average Indian plant's operating costs, currently estimated at US$30 per ton of unbagged cement (including depreciation and interest charges) for the newer installed plants employing dry process technology, has increased in recent years. They are now higher than costs at large-scale, low-cost European producer plants in Spain and Greece (most of which were set up in the mid-1970s), but are still comparable to costs of plants in other European countries such as France, West Germany and UK. Much of the Indian advantage in operating costs derived in the past from the low price of Indian coal relative to fuel oil which was then being used in many European plants, as well as the low wage rates for Indian labor, which more than offset its lower productivity. This advantage has now eroded, particularly for the older, wet process plants where average operating costs are already much higher at US$45/ton. Further deterioration will occur if urgent steps are not taken to modernize existing plant and equipment, improve operational efficiency and product

3/ This permitted the older plants to be treated like post-1982 plants; i.e., lower levy quota, so that the owners would have an incentive to modernization/rehabilitationby increasing cashflow significantly. The -sick status was only available for a maximum three-year period. - 8 - quality, institute better environmental control, and upgrade operator skills. This objective of improved fuel efficiency, productivity and cost minimization is the primary thrust of GOI's policy and strategy in the Seventh Plan. Without this modernization, which has already begun in a number of units, the industry, as a whole, cannot prepare itself to meet the challenges of the changing market environment.

D. Key Subsectoral Issues

2.12 Pricing and decontrol have traditionally dominated the range of issues confronting the Indian cement industry, particularly over the past decade. The industry has been split on the issue of decontrol - smaller single plant companies continuing to favor some controls and a maintenance of the allocation system largely in its present form, the larger and/or more aggressive producers favoring a totally decontrolledmarket. However, a consensus appears to be growing in favor of the latter position, partly in response to recent GOI overtures and liberalizationmeasures that have begun to be felt in other sectors of the economy. GOI had seriously considered abandoning the dual pricing and control system at the start of the current Plan period. However, partly in response, to industry concerns on its state of preparedness to deal with an open market environment, GOI has decided to proceed with decontrol in a gradual manner, and thus to achieve the objective of substantial decontrol, only by the end of the Seventh Plan, i.e., in 1989/90 (para 2.10).

2.13 The cement industry's current lack of readiness for total decontrol is based on the continuing obsolescence of a large part of its plant and equipment, the existence of nearly 42% of capacity still in the wet process technology, the lack of significant marketing organization and distribution systems, the inattention to product quality fostered by years of cement shortages and output allocation, the inadequate attention to the long-term development of the limestone resource base, the continuing dependence on poor quality coal, and the lack of adequate industry-wide operator training programs.

2.14 The first priority that is clearly felt is the upgrading of older plant facilities, as a basic step to lower production costs and to match the higher quality cement being shipped from the newer plants to an increasinglysophisticated market. Operator training both for improving maintenance of existing plant and for operation of newer technologies is also of high priority. The proposed Project addresses these priority areas through a three-pronged approach, i.e., large-scale process conversions, smalle--scale modernizationsand a technical assistance and training package. As the market becomes more competitive,all producers will be forced to bring cement quality closer to internationalnorms (see also para 3.17). The issue of limestone resource development is closely tied to improvement of coal quality which can only be achieved by long-term programs. The ongoing program of modernization in the coal sector, for which assistance is being provided under a series of IBRD-financed projects - 9 - will address the coal quality problem on a broad basis.4 / Improvement in coal quality would extend the life of limestone reserves, improve cement quality and smooth out large variations in kiln operating conditions and increase kiln refractory life significantly. The issue of improved limestone resource management can be tackled only at a subsequent stage of the industry's development. The issue of improved marketing and distribution systems (see paras 3.11 and 3.16) is being addressed now, only by the larger private sector cement manufacturers. As the pace of decontrol accelerates in the coming years, industry in general will be forced by competitive market pressures to build up and improve marketing and distribution systems, including installation of bulk handling facilities and ready mix batching operations at major consuming centers. A final issue concerns the management and performance of cement units owned by various State Governments. CCI, as the premier public sector unit, has performed relatively well, considering its role of developing cement manufacture in remote areas, which were shunned by the private sector, and has developed a well-trained cadre and continues to be a major source (besides ACC) of trained manpower to the rest of the industry. However, State Government units have performed, in general, below the industry norms. GOI's long-term concern is to improve the efficiency of these plants so that eventual devolution to the private sector may be possible. GOI also is pursuing a deliberate policy of diminishing the role of the public sector in the cement industry by reducing and/or eliminating proposed allocations in the Seventh Plan for expansion of CCI capacity.

2.15 An estimate of total financing needed for modernization of the Indian cement industry has been prepared by CMA. At the start of the 1985/86 financial year, there were 34 wet process plants in operation. Of these, 10 had already started conversion programs or were committed to carrying out major investments; another 10 were planning conversions, although commitments have not been made yet. Of the remainder, 7 plants will not convert due to technical and/or economic reasons (dwindling limestone resource, plant too old for economic conversion at the particular location, more attractive expansion alternative at other plant locations, etc.), and 7 plants have not made any plans. The estimated cost of converting the 20 plants already committed or planned is about US$1,100 million in June 1985 terms, based on average unit costs developed under the proposed project. Modernization of other cement plants with small-scale investments in specific process areas and introduction of environmental controls could be expected to add another US$250-300 million in financing requirements. In addition financing for new capacity increase will require about US$1.5 billion at current investment costs of about US$120 per installed ton. Thus, total financing needs of the industry, if they are to meet the projected cement demand over the next five years (see para 3.09), could exceed US$2.8 billion equivalent. Although the industry, in general, is in good financial health, in part due to the decontrol measures of recent years, and has sufficient tax and other fiscal inducements from GOI for further investment and modernization,its current level of internal cash generation will cover only about 25-30% of

4/ Dudichua Coal Project (Ln. 2393-IN) and Jharia Coking Coal Project (Ln. 2498-IN). - 10 - the total financing requirement; the remainder must be raised in the market place from the Indian financial institutions and external sources, including the proposed Bank loan. In addition to demands for financing, the modernization and expansion process will place heavy demands on trained manpower, which will require special efforts both at the secondary technical education levels prior to entry into the industry and at the pO9 t-entry on-the-job levels. These concerns also are proposed to be addressed under the Project.

E. Role of the Bank Group

2.16 The Bank's role in the preparation of the proposed Project continues the active dialogue initiated under the 1980 subsector study. The complex nature of the conversion programs, and the lack of significant prior experience in India in such projects, led to the proposed structuring of the project into two parts; the main part, channelled through ICICI and IDBI in their traditional roles as lead financial institutions for the five companies but with all subprojects fully appraised by the Bank; and Part B, passing through ICICI as the financial intermediary, for the smaller scale modernization programs. In this manner, Bank involvement has also resulted in the use of international competitive bidding procurement procedures and the limited turnkey- concept for major equipment supply packages under Part A of the project (para 5.09), thereby opening the way for acquisition of modern technology not yet readily available in India and the improvement of plant installation and start up capabilities of the industry. Bank involvement in the detailed appraisal of the six conversion subprojects stressed the need to consider long-term company strategy in project design and evaluation of options. The Bank has also played a leading role in the introduction under the Project of electrostatic precipitators and bag houses for satisfactory environmental control. The acceleration of industry trends to greater energy conservation is also related to the Bank's involvement in the subsector. In the future, the Bank's role will be to redirect industry attention to the technologicalissues mentioned in paras 2.12-2.14 and assist the subsector in realizing its long-term potential.

2.17 The IFC has been active in the cement subsector since 1981, when it made its first investment in a greenfield plant for Coromandel Fertilizer Limited. Subsequent investments have included greenfield plants and/or major expansions for the Indian Rayon Corporation Ltd., Modi Cements Limited, Gwalior Rayon Silk Manufacturing Company and the most recent, Larsen and Toubro Limited. IFC has also been instrumental in arranging the financing for large-scale greenfield and expansion plants for mainly new entrants to the cement industry, encouraged by the liberalizationof the rules for entry for large industrial houses by the improving pricing policy and decontrol situation and by an array of fiscal incentives offered by GOI. The IFC-assistedportfolio covers about 4 million TPY of new cement manufacturing capacity that is expected to be fully operational by 1989/90, representing about 10% of present installed capacity and about 8% of the expected capacity at the end of the decade. As IFC's cement portfolio now represents nearly 32% of IFC's total exposure in India, it is likely that IFC's role in financing new capacity in the cement subsector will be - 11 - somewhat lower in the next four to five years, or until the present wave of new plants under construction is commissioned and attains steady state operations. Modernization and rehabilitationwill remain higher priorities over the next five years.

III. THE INDIAN CEMENT MARKET: DEMAND, SUPPLY, DISTRIBUTIONAND PRICING

A. General

3.01 The main objective of the Project is to assist the Indian cement industry in achieving higher operating efficiency by process conversions and technological improvements and it will not alter the cement supply/demand balance to any significant extent. The seven subprojects combined would cause a net increase in production capacity of only 1.82 million TPY which corresponds to about 3% of the projected industry capacity in 1988/89 and 1989/90 when most of the subprojects enter into commercial production.

3.02 During the last two decades India has suffered from a continuous shortage of cement which the industry was unable to close. To a limited extent, part of the excess demand was met by imports, but during these many years, a large unsatisfied demand has continued to exist. Cement distributionwas based on allocation, and a black market emerged. This situation is changing rapidly due to the decontrol measures of the past three years and the encouraging increase in cement plant investment. Since 1982, the industry's installed capacity has increased by 45% and supply and demand are moving close to balance. The Planning Commission projects a slight excess of supply for the near and medium term (para 3.09), but many industry representatives still believe that the cement shortage will continue, although to a lesser extent. The Bank's analysis supports that view.

B. Apparent Consumption & Production

Apparent Consumption

3.03 Cement consumption in India increased from 14.6 million tons in 1974/75 to 30.5 million tons in 1984/85, representing an average annual growth rate of 7.6%. There have been three distinct growth periods during this time span - two periods of high growth, from 1974/75 to 1978/79 and 1981/82 to 1984/85, when consumption grew by 9.6% and 10.8%, respectively; these two high growth periods were interspersed with a period of negative growth (-2.4% annually) from 1978/79 to 1980181, when industry production suffered because of chronic shortages of coal, power and transport facilities. Table 3.1 below shows historical capacity, production, consumption,export and import figures for the last ten years. - 12 -

Table 3.1

India - Historic Cement Production and Consumption a/ (In millions of tons)

Capacity Utili- Apparent Year-end zation Pro- Con- Capacity (Z) duction Imports Exports sumption

1973/74 19.7 74.0 14.7 - 0.2 14.5 1974/75 20.0 74.0 14.8 - 0.2 14.6 1975/76 21.1 82.0 17.3 - 0.3 16.8 1976/77 21.6 88.0 18.8 - 0.7 18.1 1977/78 21.9 88.0 19.4 0.2 0.8 18.8 1978/79 22.6 86.0 19.4 1.7 - 21.1 1979180 24.3 73.0 17.6 1.5 - 19.1 1980/81 27.0 70.0 18.6 2.0 0.5 20.1 1981/82 29.3 72.0 21.1 1.6 0.3 22.4 1982/83 33.5 69.2 23.3 1.3 - 24.6 1983/84 36.9 73.2 27.0 2.0 - 29.0 1984/85 42.7 74.4 30.2 0.3 - 30.5

Average Annual Growth (Z) 1974/75 to 1984/85 7.4 - - 7.6 1974/75 to 1978/79 7.0 - - 9.6 1978/79 to 1980/81 -2.1 - - -2.4 1981/82 to 1984/85 12.7 - - 10.8 a/ Fiscal years ending March 31.

Sources: Cement Manufacturers Association (CMA) and the Working Group for Cement Industry, Seventh Plan (WG).

3.04 The per capita consumption of cement in India was 42 kg in 1983/84 which is relatively low compared to the country's degree of industrializationas seen from Table 3.2, which compares GNP per capita, industrial output as a percentage of GNP and per capita cement consumption for selected countries. - 13 -

Table 3.2

Cement Consumption in Selected Countries, 1984 a/

GNP per Capita b/ Industrial Output b/ Per Capita Cement (US$ equivalent) as Z of GNP Consumption (kg)

United States 14,110 32 293 Brazil 1,880 25 161 Thailand 820 27 143 Egypt 700 33 279c/ Tanzania 240 15 21 Pakistan 390 27 56 India 260 16 42 Malawi 210 13 14 Somalia 250 11 31 a/ Consumption refers to apparent consumption, i.e. production plus imports, less exports. b/ 1983 figures. -' Estimate, not verified.

Sources: World Development Report, 1985, and Cembureau, February 1985.

The low per capita cement consumption was most likely due to the persistent cement shortage. The allocation system resulting from Government controls on sales, distribution and imports prevented potential consumers from acquiring cement and the cement producers had little incentive to promote the sales of cement.

Cement Production

3.05 The production growth rate averaged 7.4% per year during the decade from 1974/75 to 1984/85. As seen in Table 3.1 the yearly production increased during the last three years from 21.1 million tons to 30.2 million tons, corresponding to a growth rate of 12.7%. This growth rate parallels the 13.4% growth rate in installed capacity. Capacity utilization during recent years has averaged close to 73% 5/ which is on the low side. Problems with power supply, coal supply and rail service had a major effect on the utilization factor during the years 1980-84, with power supply being the most critical. The industry has alleviated some of the problems with power supply by installing captive power-generating facilities in the plants.

5/ 100% capacity utilization is defined in India as obtaining an annual production corresponding to 330 days of kiln operation at rated capacity. By international definition it would be calculated as 90.4% capacity utilization. - 14 -

C. Supply and Demand Projections

3.06 Table 3.3 shows projected year-end capacity, production, and demand of cement for the period 1984/85 to 1989/90. Annex 3-1 shows the statewise distribution of actual production in 1983/84 and 1984/85 and production forecasts by year up to 1989/90.

Table 3.3

India - Forecast Cement Capacity and Production (Million tons)

Year-end Capacity Production Public Private Planning Sector Sector Total Bank a/ Commission b/

1984/85 (Actual) 7.6 35.0 42.6 30.2 30.2 1985/86 7.6 38.4 46.0 34.1 37.3 1986/87 8.6 42.6 51.2 37.3 40.9 1987/88 10.8 45.3 56.1 42.2 45.5 1988/89 11.2 49.2 60.4 46.5 48.4 1989/90 11.5 50.3 61.8 49.8 50.8 a/ Calculated from annual increments in capacity assuming 6-month delay in project implementation. Capacity utilization rates are assumed 75% for 1985/86-1987/88and 80% for 1988/89 and 1989/90 (or actual 1984/85 utilization rate if higher); for new plants - 50X for the first 12 months and 70% for the next 12 months and 80% thereafter. b/ 852 capacity utilization except for new plants, where 50% utilization is used for first 12 months and 65% for the next 12 months.

Sources: WG and CMA, and mission estimates.

Forecast of Production

3.07 The production forecast is calculated from the indicated year-end installed capacity, based on known commitments by the various cement companies. The Bank forecast is more conservative, reflecting past experience with project delays and historical capacity utilization rates. The lower utilization rates also take into account the commonly expressed concern regarding the ability of the railroads to meet the total national demand during the Seventh Plan. On the positive side can be listed the existing tendency to understate plant capacity for the new projects and on the negative side the shortage of skilled personnel to operate the sophisticatednew plants.

Cement Demand

3.08 For demand projections the Planning Commission has relied on regression methods using traditional variables (i.e., capital formation in construction, gross domestic product, relative price of cement). However, following the partial deregulation in February 1982, market and consumption - 15 - patterns have changed so drastically that the use of regression methods for cement demand forecast is no longer applicable. Instead the demand forecast must be based on the recent consumption trends following the partial deregulation.

3.09 After two decades of cement shortage, unsatisfied demand is still a factor and in April 1984, the Working Group for Cement Industry, Seventh Plan (WG) estimated it to be 20% of apparent consumption. The Bank appraisal assumes a much lower figure of 7% in the belief that higher availability of cement during the last three years has helped to reduce unsatisfied demand. While the actual growth in consumption during the last ten years was 7.6% p.a., it rose to 10.8% p.a. during the last three years, when partial decontrol was in effect. In particular, non-levy shipments show an even higher growth rate as indicated in Table 3.4.

Table 3.4

India - Cement Dispatches, Levy and Non-levy (million tons)

1982/83 1983/84 1984/85

Levy 15.83 16.02 15.76 Non-levy 8.21 10.10 13.36

Total 24.04 26.12 29.12

Source: Cement Controller (estimates).

Levy cement shipments have remained essentially constant and most sources indicate that the public sector consumption is likely to remain flat at approximately 15 million tons per year. Non-levy shipments have increased at 27.6% p.a, and, as a percent of total shipments, increased from 34.2% to 45.9% during this period. Annex 3-2 shows non-levy shipments to 15 individual states 1982-85 and the non-levy growth rate for each state. The growth rates for the 15 states average 38Z on a non-weighted basis, a growth rate which obviously cannot be sustained over a long period. Part of this increase has served to reduce the unsatisfied demand. The appraisal mission has chosen a 9.5% p.a. growth for forecasting cement demand on the grounds that, as deregulation progresses and an increasing percentage of the cement production is sold in the free market (non-levy cement), the cement manufacturerswill actively promote sales of cement by establishing proper distribution systems to reach markets and sectors previously ignored (such as for instance the large rural private sector). In addition concrete will be promoted against other road and construction materials. The Bank demand forecast (based on actual 1984/85 apparent consumption of 30.5 million tons and assuming 7% unsatisfied demand and 9.5% p.a. growth) is shown in Table 3.5, where it is compared to the Planning Comnission estimates for the Seventh Five-year Plan. The Planning Commission estimate uses a 6% p.a. growth and is based on a much higher 1984/85 demand. - 16 -

Table 3.5

India - Estimate of Supply/Demand (million tons)

Planning Commission Bank Estimate Surplus Surplus (+)/ ~~~~~~~(+)I Pro- Deficit Pro- Deficit duction Demand (-) duction Demand (-)

1984/85 30.17 37.15 -6.98 30.17 32.60 -2.43 1985/86 37.27 39.37 -2.10 34.13 35.70 -1.57 1986/87 40.89 41.74 -0.85 37.29 39.01 -1.72 1987/88 45.46 44.24 +1.22 42.19 42.80 -0.61 1988/89 48.37 46.90 +1.47 46.51 46.87 -0.36 1989/90 50.77 49.00 +1.77 49.84 51.32 -1.48

Table 3.5 shows that while the Planning Commission estimates result in a cement deficit for the first three years and then a moderate surplus, the Bank estimates result in a continuous but rather moderate deficit situation.

Regional Supply and Demand Forecast

3.10 Table 3.6 shows the projected capacity, production and demand for 1984/85 and 1989190 by region, and Annex 3-3 production and demand by state (See also Maps 19204 & 19205)

Table 3.6

India- Forecast of RegionalCapacity, Production and Demand for 1984/85and 1989/90 (Million TPY)

1984/85 1989/90 Pro- Pro- Capacity duction Demand Balance Capacity duction Demand Balance

North 9.17 5.64 8.05 -2.41 10.20 8.24 12.33 -4.09 East 4.63 2.82 5.54 -2.72 5.15 4.19 7.69 -3.50 West 13.64 10.57 10.09 +0.48 24.04 19.26 17.94 +1.32 South 15.18 11.15 8.96 +2.19 22.44 18.15 13.36 +4.79

Total 42.62 30.17 32.64 -2.47 61.83 49.84 51.32 -1.48

Currently, the North and East are deficit regions and the West and South surplus regions, and the forecasts show that this pattern is further reinforced by 1989/90. The main reason for the regional imbalance is that the major known deposits of limestone, the main raw material for cement manufacture, are concentrated in the South and West. Cement plants - 17 - traditionally are located close to the source of limestone for transportationconsiderations (it requires 1.3-1.5 tons of limestone to produce 1 ton of cement). The North and East regions contain smaller deposits of lower-quality limestone which are difficult to exploit. The policy of freight equalization, which GOI has practiced since 1956, has provided no incentives to the cement manufacturers to develop the more difficult limestone deposits in the North and East. It is expected that decontrol and elimination of freight equalization (para 2.10) will provide the necessary incentives for the industry to consider much more carefully the optimum location for both cement plants and cement terminals.

D. Marketing and Distribution

3.11 Government control of distribution and pricing of cement has been in effect in India for many years (para 2.09). As discussed in para 2.10, GOI policy is moving steadily towards complete decontrol of price and output. However, in the short run, the remote deficit areas in India could experience a sharp increase in cement prices as a result of decontrol and consequentabandonment of the freight equalization system.6 / One way to alleviaLe short-term hardship would be for GOI to subsidize explicitly cement sales in remote areas until distribution systems improve and more cement is available for wider distribution at lower cost to the industry.

3.12 As increasing amounts of cement enter the free market the present cement distribution system is becoming inadequate. During the many years of cement shortage under the cement controller's allocation system, cement was sold long before shipping, and manufacturers saw no need to establish distributionfacilities and to maintain cement stocks away from the plants. The requirements are different today as a much higher volume of the cement is shipped to the free market without prior commitment by an end user. The cement companies are now establishingwarehouses adjacent to rail spurs with a storage capacity on the order of 2,000-5,000 tons. The cement is sold through stockists, who function both as a retailer and a wholesaler. Some cement companies have chosen to develop a strong sales staff who will operate the warehouses, while other cement companies prefer to operate through independent wholesalers. The lack of inventory capacity is creating problems in marketing. On a number of occasions the delay of cement trains into Bombay has caused prices to fluctuate by 5-8% on a daily basis, and these fluctuations are sometimes misread as price manipulation by the manufacturers. The physical distributionis cumbersome, since 100% of the cement is shipped in bags and all handling is manual. The predominantpacking material is jute bags which leak, and as a result the customer cannot expect to receive the stipulated net weight. The industry recognizes that as the free market develops, marketing and distribution must become more sophisticated. The development of bulk handling facilities and acquisition of related transport equipment will be necessarily at a pace consistent with gaining market acceptance of bulk

6/ Under freight equalization, the freight cost for levy cement is averaged for all shipments in India and charged on a per ton basis so that consumers close to the point of shipping are subsidizing levy cement consumers at locations distant to the point of shipping. - 18 - cement and ready-mix batch operations, particularly in the large urban demand centers.

E. Cement Pricing

3.13 Levy Cement. The price of levy cement as bulk cement is controlled at the FOB plant level. Including Rs 4/ton of allowed selling and distribution cost, the present FOB plant price is Rs 364 /ton for PPC cement and RS 379/ton for OPC and other types of cement. A price-control mechanism was established in 1981, which should assure the cement industry a post-tax return of 12% on net worth according to defined assumptions. When partial decontrol took place in February 1982. allowing a certain part of the production to be sold in a free market (non-levy cement), it was assumed that the weighted average price of levy and non-levy sales should provide the same 12% return on net worth. CMA and GOI entered into an understanding whereby levy prices would be adjusted periodically in response to increases in input costs. In practice, GOI has not adjusted levy prices at the same reae as input costs have increased and CMA has claimed that the levy price is currently about Rs 85/ton below what it should be according to the pricing formula.7/ However, it appears that GOI has chosen to allow an increasing percentage of the production to be sold as non-levy cement, rather than adjusting levy prices in line with input cost increases. In fact, the average retention price to the manufacturers has increased in accordance with the increasing share of production sold in the open market. The gap between levy and market prices has also decreased since mid-1982 from over Rs 500 to under Rs 300/ton now (see Annex 2-5). Recent discussion between GOI and CMA have focussed on the steep increases in input costs such as coal and power and the rapidly escalating capital investment costs of new plants, which may be acting as a brake on new investment in the industry. GOI is now considering other policy initiatives (in addition to further decontrol) to stimulate new investment which is needed if India is to close the gap between demand and supply (para 3.09). Annex 3-4 shows the variation in the FOR stockist levy prices over the last five years. Of the September 1985 price, the manufacturer retains approximately 42%, and taxes and state and government fees amount to 26%. The price diff.,:enceof Rs 15/ton bet-een OPC and PPC cements is quite unrealistic when compared to both manufacturing costs and quality of the two types of cement and the industry anticipates that as the market becomes competitive the share of PPC cement will drop drastically.

7/ As discussed in para 6.02, the average realization price of a representative sample of cement plants is about Rs 655/ton (inclusive of packing charges) which compares with an average manufacturing cost of about Rs 536/ton bagged (including financial charges and depreciation) for wet process plants established prior to 1982; and about Rs 528/ton bagged due to the impact of expected cost savings arising from modernization and conversion. The higher variable operating costs of older wet plants is nearly balanced by the higher depreciation and financial charges of the newer, modernized installations. However, greenfield plants would reqdire a higher margin to cover additional financial and depreciation charges corresponding to approximately 50% higher capital costs as compared to the typical converted plant. - 19 -

3.14 Non-levy Cement. At the time of partial decontrol, the cement manufacturers voluntarily agreed to a price ceiling for non-levy cement, which was Rs 60/bag (Rs 1,200/ton) In Kerala, Maharashtra, Goa, Jamam and Kashmir and the Northeastern states, and Rs 56/bag (Rs 1,112/ton) for all other states. In recent months, CMA ceilings have been increased to Rs 69/bag and Rs 64/bag, respectively. As explained in para 3.11, these are ex-stockist prices (exclusive of local taxes varying from 3-10% depending on the state). However, short-term retail level fluctuations have brought price levels to as high as Rs 85/bag in some urban areas such as Bombay and Delhi. GOI has not intervened in such cases.

3.15 Table 3.7 shows a typical price buildup for levy and non-levy OPC cement.

Table 3.7

India - Breakdown of Cement Prices (as of August 1985) (Rs/ton)

Levy Non-levy

Sales Price FOR Stockist a/ 1,042 1,305 Surcharge (Municipal) 7 10 State Sales Tax (1OZ) 94 97 Truck to Warehouse 0 40 Rail Freight 142 175 Excise Tax 225 225

Fee Cement Controller Office 11 0 Packing Costs 184 184 Plant Retention, incl. Selling & Distribution Cost 379 575

a! For non-levy cement the stockist's margin is included.

In this compariseb the manufacturer realized a premium of Rs 195/ton on non-levy shipments. The premium can go as high as Rs 450/ton, and if this non-levy cement had been sold at the ceiling price of Rs 69/bag (Rs 1,380/ton) the premium would have been Rs 270/ton.

F. Imports

3.16 Imports have not been a major factor in the Indian cement market. During the years 1978/79 to 1983/84 when shortage of cement was most acute, annual imports peaked at 2 million TPY (corresponding to 10% of apparent consumption) and in 1984/85 when the cement shortage had eased, it fell to 0.3 million TPY (1%)as seen in Table 3.'. Cement imports are controlled by GOI and, since 1983/84, are channeled exclusively through the State Trading Corporation (STC). In the past, GOI authorized cement imports to cover the expected shortfalls in domestic production. Since 1982, GOI has begun to use imports as a means of partial price stabilization in the open market. The Indian ports are quite congested and - 20 - lack bulk handling facilities for cement. Therefore, cement must be imported in bags with consequent high handling and transport costs. In spite of the low (15X)tariffprotection, this reduces the competitiveness of imported cement except in and around the port cities. For example, STC currently contracts for bagged cement at $27/ton FOB and $50-55/ton C&F. After applying 15% duty, Rs 205/ton counter-vailingduty (excise duty), Rs 100/ton for handling and adequate allowance for insurance, financing and profit, the cement is sold FOB port city at Rs 60/bag, corresponding to Rs 1,200/ton. This compares to Rs 1,050/ton for levy cement and Rs 1,400/ton for non-levy cement. For inland consumption another Rs 150-200/ton must be added to the price of imported cement and that would remove any price advantage of imports.

3.17 Currently the approximately 20% higher strength of imported over domestic cement is the main reason why mostly state and central government agencies consumers are willing to pay Rs 150/ton extra for imported cement, a difference of only 9% over the retail price of levy cement. In the future, the quality factor will become less significant as the domestic producers improve product quality in response to a more competitive market. On the other hand, until bulk handling facilities and improved distribution systems are available, imported cement will not be a significant factor in reducing open market prices even in the port cities. The present distribution structure and rapid increase in domestic production does not provide sufficient incentives for development of bulk import facilities. The lack of sophistication in the market also discourages such a development in the short run.

3.18 In light of the above, GOI policy is to maintain import controls on cement in such manner as to permit orderly development of domestic marketing and distributionsystems, while, at the sam time, providing incentives for continued capacity buildup and quality improvements in the market. GOI policy has been justified by the emergence of a much stronger and modernized cement industry that is generally competitive by international standards and remains an economic producer of cement (para 2.11). Any sudden change in import policy and rapid increase in imports would only cause dislocations in the existing marketing and distribution channels, overload already congested port and rail facilities and, lead to profiteering by middlemen. For the above reasons, there would not be any significant economic gain to the country.

IV. THE PROJECT

A. Project Objectives

4.01 The project responds to the three pronged subsector strategy outlined in para 2.14. Its first objective is to assist the cement industry in improving operating efficiency of older wet process cement plants, particularly as it pertains to fuel-efficiency. Rapidly increasing coal prices have made it impossible for these old plants to rpmain financially viable, and have made it necessary either to change to more energy-efficient technology or shut down operations altogether. As described in para 2.15, ten wet process plants are already committed to - 21 - conversion; of these three are under implementationand one has been completed; the remaining six are the focus of the proposed project. The seventh plant is a second phase of a plant conversion program, the first phase of which was completed in early 1985. The feasibility studies have clearly demonstrated their suitability with respect to raw material sources and markets to be served. The second objective is to assist industry in effecting other improvements in operating efficiency, environmental controls, product quality, labor productivity and marketing and distribution systems and in providing a part of the estimated funding required over the next five years (para 2.19). Finally, the project aims to assist the cement industry as a whole in upgrading plant operator skills, organizing regular training and technical assistance schemes, obtaining knowhow in specific areas such as plant start-up procedures, computerized controls, and other aspects of modern cement plant operations.

B. Project Description

4.02 The project consists of three parts, with Part A, the main component, providing the financing for the seven plant conversion subprojects, Part B, financing for smaller-scale efficiency improvement projects and Part C, financing for technical assistance and training.

Part A

4.03 The seven subprojects, six in rhe private sector and one in the public sector, comprise the following elements:

(a) conversion of the kiln system from wet process to dry process preheater, precalciner system; and

(b) upgrading of the other plant process areas to assure sustained plant operation at the new rated capacity.

In the six cases which have been fully appraised, all options for conversion were identified and analyzed in order to select the most cost effective approach. Typically the following areas were examined: (a) capital costs; (b) future operating costs; (c) adequacy of raw material reserves; (d) capacity of existing infrastructure; (e) market conditions; and (f) ability to operate existing facilities during implementation. For every subproject it was found that the optimum option comprised the replacement of the existing old kilns with one preheater, precalciner kiln of a somewhat larger capacity (on an average capacity was increased by 46%). All process areas upstream and downstream of the new kiln system were examined for adequacy in relation to the new project capacity, and deficient process areas were upgraded and rehabilitated. A brief descriptior -f the project sponsors is given in Annex 4-1. More details are present in the Project File Items 4-1-4-6). Subproject locations are shown in Maps 19204 and 19205.

4.04 The seven subprojects entail a total production increase of 1.82 mil-ion TPY, corresponding to 46% of the present total cement capacity of the s.x plants. This capacity increase is equivalent to 3.0Z of the projected industry capacity in 1989/90. The average improvement in fuel - 22 -

efficiency for the six subprojects already appraised is 42%. The basic features of all subprojects are tabulated in Table 4.1 below. Detailed project descriptions of the six already appraised are found in Annexes 4-2 to 4-7.

Table4.1

Su&=ryof PnopsedPart A Caiersim Sunogects

No. of Kils FatedCapacity New New Ehist- Pro- ('000tpy) New Raw Cment

No. Cw Plant location __ p Cinger CamentCrusher Mll Mlils

1 ALC MaduidcaraiTmiI Nadu 5 wet 1 dry 490 500 No ND No

2 ACM Shahabad Karnataka 5 wet 1 dry 800 850 Yes Yes Nb

3 BirlaJute Satna MaHya Padesh 3 wet 1 dry 740 750 No Yes Co.a/

4 OCI Mandharb/ lbdhyaPradesh 1 set 1 dry 500 680 NO Yes Gm.a/

5 Tndia Sarnagar TamilNadu 5 wet 1 dry 990 1,000 Yes Yes Gxi.a/ Cements

6 KCP Macherla AndhraPtadesh I y 1 dry 4C0 425 No Yes Con.a/ 1 wet

7 SDC Sikka Gijarat 1 wet 1 dry 660 700 Yes Yes Yes

Total 4,580 4,905

-~~ a/ Oneor severalrw mf l to be coovertedto cementmill. bJ Presently100% slag cment, fiuture 57% slag and 43%PPC.

4.05 ACC - Madukkarai Plant. The project comprises installation of two additional flotation cells for the limestone beneficiation plant, a new vacuum filter plant and a crusher/dryer for dewatering of the kiln feed, new dry process kiln department (3-stage, preheater, precalciner kiln) and a 6 MW diesel generator for captive power (correspondingto 32% of total demand). The company controls two limestone deposits with total combined reserves of 87 million tons, corresponding to 130 years of operation. The deposits are difficult to mine and 70% of the limestone must undergo a wet beneficiation process, resulting in a 35% moisture content of the kiln feed.8/ The project employs a novel process for dewatering the kiln feed to permlt utilization of a preheater, precalciner kiln. The drying process relies on the preheater exhaust and the number of stages in the preheater has been limited to three in order to obtain a high enough exhaust temperature. As a result the fuel efficiency is approximately 15% lower than for a 4-5 stage preheater. The inherent high cost of beneficiation

8/ The conversion is thus from an existing wet process to a semi-dry process as rawmilling remains a wet process. - 23 - can be accepted for this project because of the favorable location of the plant in relation to the market (details in Annex 4-2.)

4.06 ACC - Shahabad Plant. New equipment under this project comprises a limestone crusher, aerial ropeway for transportation of crushed limestone, preblending facilities for limestone, new dry process rawmill and kiln departments with efficient dust collection equipment, preblending facilities for coal, one rotary cement packing machine. The present plant includes an old 10 MW coal-fired power plant which must either be rehabilitated or replaced in order to provide higher captive power capacity. Including the reduced output of the old captive power plant and new DG sets to be installed the plant will have captive power generation corresponding to 63% of the 18 MVA required for the converted plant. ACC controls 25 million tons of limestone reserves corresponding to 17 years of operation of the new kiln. Another major deposit adjacent to the plant is being prospected and will be leased as and when needed (details in Annex 4-3.)

4.07 Birla - Satna Plant. Major equipment purchases under this project comprise some quarry equipment, dry process rawmill and kiln department with high efficiency dust collecting and packaging machines. One of the existing rawmills will be converted to a cement mill. The company has ample reserves of good quality limestone corresponding to 26 years of operation. The company will have captive power-generating capacity of 20 MW corresponding to 65% of the total combined demand of the Satna plant and the adjacent Vikas plant, which commenced production in 1983 (details in Annex 4-4.)

4.08 CCI - Mandhar Plant. Project purchases comprise quarry equipment, limestone preblending facilities, new dry process rawmill and kiln departments with efficient dust collection equipment, cement storage silos, and a rotary cement packing machine. The existing rawmills will be converted to cement mills. The plant has 2.4 MW of captive power-generatingcapacity corresponding to 20% of the new power requirement. The plant controls 29 million tons of limestone reserves, corresponding to 45 years of operation. The plant has a contract with the steel plant at Bhilai, 40 km from Mandhar, for the supply of 200,000 TPY of granulated slag. CCI would have liked to double the contracted amount of slag, but Bhilai Steel is unable to deliver more. ConsequentlyCCI will grind the incremental clinker production into pozzolan cement (details in Annex 4-5.) 4.09 ICL - Sankarnagar Plant. New equipment under this project comprises a limestone crusher, limestone preblending system, new dry process rawmill and kiln system with efficient electrostatic precipitator for gas cleaning, clinker storage silo, a rotary packing machine and a 4 MW diesel-generatingplant. The plant will have 10 MW of captive power-generatingcapacity corresponding to 40% of the total power requirement. Currently 10X of the total kiln fuel consumed consists of lignite and ICL intends to double that percentage to improve cement quality. The limestone reserves amount to 25.5 million tons when mining to a depth of o0 meters, and by mining to 72 m an additional 30.3 million tons of reserves Jre added, and the reserves would suffice for 28 years of operation (details in Annex 4-6.) - 24 -

4.10 KCP - Macherla Plant. Project purchases comprise quarry equipment, new dry process rawmill and kiln departments which will use the existing high-efficiency dust collection equipment, and two new rotary cement packing machines. One existing rawmill will be converted to cement mill. The company controls 32 million tons of limestone reserves corresponding to more than 50 years of operation. The plant has not experienced problems with power supply and the project does not include provision for any captive power-generating capacity (details in Annex 4-7).

4.11 SDC - Sikka Plant. The project would finance the company's proposed second phase conversion of the Sikka plant, located in Jamnagar district, Gujarat. The converted plant would have a clinker capacity of 1.77 million tons, an increase of 38X from its existing capacity of 1.285 million tons, from an existing 600 tpd wet process kiln and a recently converted 2,000 tpd dry process kiln. The wet process kiln would be replaced by another 2,000 tpd dry kiln. Cement capacity would increase from 1.025 million tpy to 1.51 million tpy; the company also operates two cement grinding units with a total capacity of 300,000 tpy. Equipment to be procured under the project includes quarry equipment, limestone crushing plant, aerial ropeway, belt conveyor, limestone preblending system, a new dry process raw mill, a kiln system with electrostatic precipitator for gas cleaning, clinker storage silo, cement silo and rotary packing machine, a coal mill for kiln precalciner and associated coal feeders and duist collection equipment.

Raw Materials and Other Input Materials

4.12 Adequacy and suitability of raw materials were examined for all six subprojects under Part A. For purchased input materials source and location were specified and in all cases the reliability of supply was confirmed as evidenced by long-time supply associations. Coal linkage, which is critical for a greenfield plant, is not an issue for the projects, since the plants already have coal linkage. The CCI Mandhar plant will require a 15% increase in coal supply but all other conversion projects will result in reduced coal consumption.

Infrastructure

4.13 Power requirementswill increase for all the plants, mainly because of the increased production but also because of the higher specific power consumption of the dry process (approximately 10% higher than wet process). Upon obtaining the industrial license, the plants are automatically assured of receiving the incremental power required. All have been required to install transformers dnd substations to receive power at 132,000 volts, which has become the standard, and the indicated capital costs provide for this requirement. Nearly all of the projects include installation of captive power generation, where needed, to permit continued operation of the kiln system during power cuts which are still common in many states. Water supply is not a problem for any of the plants, particularly because the water requirements are reduced with the application of dry process operation. - 25 -

Environmental Impact and Pollution Control

4.14 The major source of pollution in a cement plant is dust emission originating with kiln and mill exhaust and conveyor transfer points. India has recently introduced standards for source emission of solids, equivalent to 250 mg/NM3. These standards are deemed satisfactory. All projects comprise pollution control equipment for rawmill and kiln exhaust which will comply with the new Indian standards. Three project sponsors (i.e., Birla Jute, CCI and ICL) have provided for well-designed dust collection equipment for the clinker cooler exhaust to comply with the emission standards. KCP is reviewing technical options and will finalize its design choice within the next 2-3 months. After technical discussions with ACC, it has been agreed that appropriate dust collection equipment would be installed as part of a corporate-wide program that will be carried out independently of the project. Agreement was obtained that all subprojects will meet Indian environmental standards.

Part B

4.15 This component provides a line of credit of US$35 million covering the estimated foreign exchange financing requirements for smaller-scale modernization, rehabilitation,energy conservation, environmental control and balancing schemes that are expected to be carried out over the next 2-3 years at other existing plants, and for developing improved marketing and distribution systems. It would assist companies which are not included in Part A to acquire advanced technology and modern operations know-how and to improve productivity, fuel efficiency and environmental control features in their plants. Typically, a subproject under Part B would include the acquisition of software for process control, the installation of modern instrumentationand control systems, energy-saving devices, dust collection equipment and debottlenecking equipment (balancing of process units which, due to insufficient capacity, prevent the rest of the plant from attaining rated capacity). The component would also finance technical assistance to improve operations and management. ICICI has already obtained expressions of interest from several companies. Of the total estimated financing of US$250-300 million needed by the industry for these smaller scale modernization programs, only about 30% could be met from internal sources (para 2.15); the remainder, i.e. US$175-200 million, would need debt financing; the proposed line of credit would thus provide about 20% of this eAternal requirement covering foreign exchange needs, for commitment over 2-3 years. Subprojectswill be identified and appraised by ICICI. The average size of loan financing from the line of credit would be about US$5-8 million equivalent, and the average project size would be about US$10-15 million equivalent. Appraisals for subprojects, whose total funding requirements from the proposed line of credit exceed US$6 million equivalent, would be subject to prior Bank review and approval.

Part C

4.16 This comprises two sub-components and provides financing for technical assistance and training. The Indian cement industry is expanding - 26 - rapidly with many new companies entering the industry, and an acute shortage of skilled plant operators has developed. This expansion has coincided with a revolution in technology (dry process precalciner kilns) which has compounded this problem. The scope and content of the two sub-componentsare as follows: (see Annex 4-8).

(a) Part Cl: Improvement, upgrading of ACC and CCI owned and operated training facilities and project/company-related technical assistance and training for the five companies under Part A. The upgrading of ACC and CCI facilities would include purchase of modern training equipment and related software, constructionof new dormitory facilities, and use of experts from well-establishedfirms of international repute to design training programs, train trainers and generally upgrade the overall quality of ACC and CCI training efforts. About 6 man-years of expert assistance would be provided for these two companies. In addition, this component would cover training needs of plant operators at each of the conversion sites, as well as project management assistance (including review of technical specificationsprior to bidding, assistance in bid evaluation, supervision of detailed engineering design, and overall project management) from external consultants where specializedexpertise is required. Consultant selection is under way. About 100 man-months of total consultant assistance would be needed for this purpose. Funding for the above needs is included in the loan allocation for Part A of the Project (see paras 5.05 and 5.10).

(b) Part C2: At the subsector level, under the sponsorship of the Cement Manufacturers' Association (CMA) (see Annex 4-1), consultants would assist in preparing development strategy for the cement industry covering manpower needs, training requirements, and the strategy plan for medium- and long-term manpower development. Using the results of a manpower survey, the consultants would propose the actions needed at individual company- and industry-wide levels to upgrade existing skills to respond to changing technology requirements, to train new personnel at pre-entry and post-entry stages, and to develop suitable curricula and upgrade training facilities in existing academic institutions and in possible new training center(s) to be established by the industry. The consultants yould also evaluate the feasibility of developing jointly owned and operated training centers for the industry as a whole. The strategy study would be completed by December 31, 1986. Terms of Reference have been agreed; consultant selection is under way. Assistance would also be provided to the existing regional technical training institutes in India for the development of curricula related to fields where the industry's most pressing needs would be felt in the near and medium terms. These areas include training of maintenance personnel, plant operators, first-level supervisors, and would focus particularly on instrumentationand process control, electronics, and mechanical, electrical machinery. Some - 27 -

provision for purchase of training equipment and teaching aids would be made. A total of 50 man-months of expert assistance would be required. Funding for Part CZ of the Project would be provided under the allocation for Part C, shown in para 5.10.

Detailed equipment lists and Terms of Reference for technical assistance experts have been prepared by ACC and CCI for their particular needs and reviewed by the Bank (Annex 4-8). Terms of Reference for the proposed manpower study are also shown in Annex 4-8, which also shows the agreed timetable for implementation of the technical assistance and training component of the Project.

C. Project Management and Implementation

4.17 All but one of the project sponsors have retained qualified Indian consultants to assist in formulating project concepts and to perform the feasibility study.9/ All project sponsors have retained consultants to prepare bid specifications,assist in bid evaluation, prepare construction drawings, and provide construction management and assistance during commissioning. All consultants and most of the cement companies have recent experience in cement plant design and erection. The individual project management organizations and implementation schedule are described in connection with project descriptions in Annexes 4.2-4.7. Table 4.2 summarizes the implementationschedule for the subprojects. The schedule for the seventh subproject (SDC - Sikka plant) will be reviewed when appraisal is completed in 1986.

Table4.2

izrlia- IveetimScbdule

A5C AOC Eiria CCI HiL KCP MaddkrhwaiShababed Satna MainmarRSad re Macherla Mailingof Bid D1oanets to Biders for Major Macdhnery n.aa/ n.a.a/ 05/86 05/86 04/86 naa/ Cosing Datefor Bid Reply na.al/ Una.a/ 09/86 08/86 07/86 n.a.a/ Award of Contract nea.a/ n.a.a/ 12/86 5,187 11/86 n.aZa/ Start of Civil Works 08/86 1E/86 07/86 07/87 04/87 11/86 Ckxldsnrboldag 03/88 08/88 12/88 12/89 10/88 12/87 a/ Major Umldnry to be appied by 4ilDy med sbsddiary (nonrBRD financing). Otber euipientpackages wP be ICBpr iz underBIRD finncing;the roazeMEntscbedule forsuch other packdus is sbcawin the respectiveAnnmws 4-2,4-3 and 4-7.

The most critical element in the implementation schedule is delivery time for major equiiment. Most equipment of Indian make requires 18 months from date of order, wh'le overseas equipment may only require 12 months from

9/ Birla Jute has just commissioned a new plant and is implementing a major expansion of another plant, and the company does not see any need to retain outside help. Another sponsor, ICL, used two foreign consultants to review particular technical features and alternatives. - 28 - date of downpayment. The 24-30 months estimated by the project sponsors as time required from signing of the major equipment contact to completion of construction will require careful planning. However, since the construction takes place at existing plant sites with staff and infrastructure in place, and with staff experienced in construction from ongoing rehabilitationprograms, there should be no problems in achieving the indicated schedules. Allowing for any slippages, the subprojects would all be completed by June 30, 1990. The Sikka plant is also expected to be comleted by the above date; the company has completed a first phase conversion project and is well experienced in the details of implementing such a project. Detailed schedules will be reviewed during 1986 when appraisal would be completed by ICICI/IDBIand the Bank.

D. Training and Manpower Development

4.18 For all subprojects, the conversion has provided opportunity to increase labor productivity as several old inefficient production units are replaced by one unit of higher capacity. Some of the companies plan to negotiate severance arrangements or early retirement of the redundant personnel, while others will wait for normal attrition to reduce the staff (Annexes 4-2-4-7). All of the companies have increased their staff of engineers and skilled personnel to secure a smooth project implementation and start-up. The personnel selected to operate the new machinery will be trained in India either in modern plants belonging to the same company or in competitor plants. A few of the project sponsors will send selected personnel to receive training abroad. All sponsors will avail themselves of services provided by the equipment suppliers both during equipment installation and during commissioning. The most critically needed training is in maintenance and operation of instrument and computer control systems. The project provides financing for establishment of a training function in these and other related operational areas (see para 4.16).

V. CAPITAL COST, FINANCING PLAN AND PROCUREMENT

A. Capital Cost

5.01 The total capital cost for Parts A and C of the project is estimated at Rs 4,359 million (US$335 million equivalent). The total foreign exchange component is estimated at US$159 million equivalent (i.e., 47% of the total. Interest during construction is estimated at Rs 594 million (US$46 million equivalent) of which US$16 million equivalent (34%) in foreign exchange. Total financing requirements for Parts A and C amount to Re 4,953 million (US$381 million equivalent). Part B of the project is estimated to cost Rs 1,155 million (US$89 million equivalent). Incremental working capital needs at start-up of the new kilns are marginal and are not shown in the cost table. As all companies are going concerns, all incremental working capital needs at start-up and in subsequent stages of production would be met easily from established credit lines with commercial banks. - 29 -

Table 5.1

India - n3ent Iadustry Project SumnaryTotal Estilmted Project Cost

Rs Mfflion US$ MiLlion Tota Fbr- Base local Foreiga Total Local eiga Total Cbst Parts A, Cl and C2 of the Project Hmfipment& Spares 1,317.3 1,422.7 2,740.0 101.3 109.4 210.7 77.4 Civil Wbrks 291.1 175.3 466.4 22.4 13.5 35.9 13.2 infzstructure 26.9 20.5 47.4 2.1 1.6 3.7 1.4 Erection]Start-up 125.9 6.5 132.4 9.7 0.5 10.2 3.7 Coo,s-Itants/Proj. MYsaeuientiiraing 73.0 80.6 153.6 5.6 6.2 11.8 4.3 Base Cost 1,834.2 1,705.6 3,539.8 141.1 131.2 272.3 100.0 Physical utincies 138.67 116.6 255.2 10.6 9.0 19.6 7.2 Ptic Escalatinm 319.7 244.6 564.3 24.6 18.8 43.4 15.9 Total Project Cost 2,292.5 2,066.8 4,359.3 176.3 159.0 335.3 123l1 Interest D-ring Construction 390.7 203.4 594.1 30.1 15.6 45.7 16.8

Total Fiacg Required 2,683.2 2,270.2 4,953.4 206.4 174.6 381.0 139.9 Part B of the Project 680.4 474.5 1,154.9 52.3 36.5 88.8b/ 32.6

GRANDlUtAL FINANCING 3,363.6 2,744.7 6,108.3 258.7 211.1 469.8 172.5

Cost/aaml Total trn of capacty Tnstalled Oost per Coversim Project c/ CUSSmillio) (US$) ACC(Madidkdarai) 32.6 64.4 ACE(Shahabad) 84.4 99.4 Birla Jute 48.4 64.4 Cci 42.6 62.6 India ements 72.5 72.3 YCP 18.3 46.0 SDC(Preliminary estiite) 73.1 104.4 a/ Identifiable taxes and duties are about Rs 692 millio (US$53.2milllon equivalent) and the project cost for Parts A and C is Rs 3,667.3 mdllon (U1S$282.1millio equivalent) net of tames. b/ Identifiable tames and duties axe about Rs 189.8 millio (US$14.6 mill ic equivalent) and toanl project cast net of tames is estimted at Rs 965.1 millinn (US$74.2millio equivalent). As Part B is a lne of credit operation no separate contingncy element are Identified. c/ Iwluxig capitalzed interest during costuctim. ¶1e wid variations in per ton installed cost arise from the ectent of lia needed by th pticu plant. he ICCPcost is pariclarly low due to tIe 1ck of mjor equipment renewl needed by the edsting plant, ani as the copuy TAU nmfacture a sibstantial part of tew plant and o profit msgim have bem included in machinery costs. In the SDCcas, casts Ilze balancrl of exdstixg ns analdaitio Infrastr re to cover neds of a fist pbase coanversi already carried out by tha cosrny. - 30 -

5.02 The base capital cost estimates were prepared by the companies and their consultants from ac_ual recent quotations under Indian conditions for the principal packages for equipment and services and/or their experience with projects presently under execution. (Summaries of capital cost estimates by plant are shown as Annexes 5-1 through 5-6, and Project File Items 5-1 through 5-6 show details of the cost by major and minor bid packages.) The cost for outside assistance (including consulting fees, travel and subsistence expenses) has been estimated on the basis of an average rate of US$12,000 per man-month, with an estimated 250 man-months required (para 4.16). The base cost estimates compare very favorably with other projects outside India, since they include a substantial element of local manufacture.10/ Despite a high degree of confidence in the base cost estimate, physical contingencies have been set at 10% of base costs for civil works and certain categories of equipment purchases to allow for certain possible design modifications in several plant departments. However, for most equipment and machinery, only a 5% contingency has been applied as this would be sufficient given the status of engineering and design in most cases. Decisions on final equipment choice and layout will be taken during technical evaluation of bids prior to contract signature. The estimates include provision for price escalation using factors in accordance with IBRD guidelines applied to the base cost estimate plus physical contingencies and take into account the expected project implementation schedule of individual subprojects under Part A with project completion projected for 1989/90. The price escalation amounts to only an average of 14.8% on the base cost plus physical contingencies and reflects the mix of project implementationschedules.

5.03 The incremental working capital at start-up of the kilns under the conversion subprojects is low and is well within the capacity of the companies to finance out of existing sources and ongoing operations. The main elements to be financed would include annual stocks of spare parts and consumable items, as well as increasing receivables arising from the expected increase in sales volumes. As the subprojects also include a basic stock of spares at the outset, no separate additional pr-vision for incremental working capital at start-up has been made in the cost table. Interest during construction of US$45.7 million is derived using the expected subproject implementation schedules under Part A and the assumed terms for debt to be raised for the project as detailed in the financing plan (para 5.04). The estimates of total financing required z e reasonable.

B. Financing Plans

5.04 The total financing requirements for the project are proposed to be met as follows:

10/ A typical 1.0 million TPY plant without social infrastructure,built in Western Europe or the USA, would cost at least US$170-200 per capacity-ton (total installed cost in current terms), as compared to US$120 per ton for recent greenfield plants under Indian conditions including social infrastructure (see also para 2.11). - 31 -

Table 5.2

India - Summary Financing Plan

Z of Rs US$ Grand million million Total Parts A and Cl of the Project Total Financing Required 4,930.0 379.2 80 Of Which: -World Bank Loan to India 2,125.5 163.5 -Other Loan (ICICI, IDBI) 1,591.5 122.4 -Equity/InternalCash 1,213.0 93.3

Part B of the Project Total Financing Required 1,154.9 88.8 19 Of Which: -World Bank Loan to ICICI 455.0 35.0 -Other Loans 238.4 18.3 -Internal Cash Generation 461.5 35.5

Part C2 of the Project Total Financing Required 23.4 1.8 1 Of Which: -World Bank Loan to India 19.5 1.5 -Internal Cash 3.9 0.3

GRAND TOTAL Financing Required (A+B+C) 6,108.3 469.8 100 Of Which: - -World Bank Loan 2,600.0 200.0 -Other Loans 1,829.9 140.7 -Internal Cash/Other 1,678.4 121.1

5.05 The financingplans for the subprojects and tentative allocation of loan funds under Part A would be as follows (Details are show-nin Annexes 4-8 and 5-1 to 5-6): - 32 -

Table 5.3

Allocation of Parts A & Cl (In US$ million)

World Equity/ Bank Other Internal Loan Loans Cash Total

ACC: Madukkarai 12.1 14.0 6.5 32.6 Shahabad 28.0 39.5 16.9 84.4 Training & Technical Assistance 1.8 - 1.0 2.8 Total ACC 41.9 53.5 24.4 119.8

Birla Jute: Satna 24.5 11.8 12.1 48.4 Training & Technical Assistance 0.2 - - 0.2 Total Birla 24.7 11.8 12.1 48.6

CCI: Mandhar 22.6 5.8 14.2 42.6 Training & Technical Assistance 2.4 - 1.3 3.5 Total CCI 24.8 5.8 15.5 46.1

ICL: Sankarnagar 38.3 17.0 17.2 72.5 Training & Technical Assistance 0.3 - 0.1 0.4 Total ICL 38.6 17.0 17.3 72.9

KCP: Macherla 4.5 8.3 5.5 18.3 Training & Technical Assistance 0.2 - - 0.2 Total KCP 4.7 8.3 5.5 18.5

SDC: Sikka 28.6 26.0 18.5 73.1 Training & Technical Assistance 0.2 - - 0.2 Total SDC 28.4 26.0 18.5 73.3

Total Parts A & Cl 163.5 122.4 93.3 379.2

The subprojects under Part A of the oroject involve financing plans ranging from 50% debt and 50% internal cash generation to a maximum of 80% debt and 20% internal cash generation (including new equity and/or subordinated debt issues). The debt financing would be provided in approximately a 62/38 ratio between the proposed Bank loan and the two financial institutions out of their convertible rupee funds and through convertible and non-convertible debenture issues to be floated by some companies. The Bank portion of the financing for the main project components is based on the total estimated cost (excluding duties and taxes) of those bid packages that are expected to be awarded following ICB procurement in accordance with Bank guidelines, and to the financing of the technical assistance programs identified with each sponsor, including the upgrading of ACC and CCI training facilities as described in para 4.15 (Part Cl of the project). The detailed financing plans for each subproject already appraised under Part A are shown in Aanezes 5-1 to 5-6. All subloan - 33 - covenants with the six main sponsors will include provision for cost overrun financing to be provided on terms and conditions deemed satisfactory by the Bank.

C. Onlending Arrangements

5.06 The Bank loan for Parts A and C would be made to the Republic of India on standard World Bank terms. GOI would onlend the funds in the following manner:

(a) Parts A and Cl. The funds would be onlent in equal proportions to ICICI and IDBI (in their roles as lead financial institutions to the six companies). The onlent amounts would be in rupee terms. GOI would retain the foreign exchange risk.

- from GOI to the institutions: standard interest rate applicable to Rupee lending from GOI to financial institutions, currentl; set at 10.25% per annum

- from institutions to subborrowers: prevailing rates for Rupee loans (currently 14%)

The repayment of the amounts onlent by GOI to the institutions would be on the basis of fixed amortization schedule over 20 tears including 5 years' grace, i.e., on the same terms as the Bank loan to GOI. Terms to subborrowers would be a maximum of 13 years, including up to 4.5 years' grace.

(b) Part C2. The funds under Part C2 would be provided as a non-reimbursablegrant by GGI to ICICI who would administer the funds for the account of the CMA and the regional technical training institutes to carrr .ut Part C2 of the Project.

5.07 The Bank loan for Part B would be made to ICICI on standard terms with guarantee of the Republic of India. ICICI will repay the loan on a fixed amortization schedule of 20 years, including a grace period of 5 years, consistent with recent Bank practice. As ICICI is now allowed to have an overseas account, it would protecc itself against the foreign exchange risks by relending funds in the same currency. Onlending terms to subborrowers would follow recent Bank practice on its lines of credit to ICICI, with repayments spread over 7-10 years, including up to 2 years' grace period. Exchange risk would be borne by subborrowers.

5.08 Effectiveness of the Bank loan to India would be subject to:

(a) the signature of subsidiary loan agreements between GOI, on the one hand, and ICICI and IDBI, on the other hand, on terms and conditions deemed satisfactory by the Bank;

(b) the signature of a Grant Agreement between GOI and ICICI for use of funds allocated under Part C2, on terms and conditions deemed satisfactory by the Bank. - 34 -

No special condition of effectiveness would attach to the Bank loan to ICICI. Disbursement of funds under Parts A and Cl for each subproject would be subject to signature of subloan agreements between ICICI, IDEI and each project sponsor, on terms and conditions deemed satisfactory by the Bank.

D. Procurement

5.09 International competitive bidding (ICB) under Bank guidelines will be used for all Bank-financed goods under Part A of the project; prequalificationwould be used for major equipment packages. A preference margin of 15%, or the applicable rate of customs duties if lower, would be provided to domestic equipment suppliers in evaluation of bids received under ICB. Under Part A, the Bank has already identifie1 and agreed with each project sponsor (for the six subprojects already a:.praised)the bidding packages for ICB procurement and the prequalificationprocedures have been completed by most of the sponsors.ly Most major packages would include supervision of erection/installationto ensure satisfactory performance guarantees, and may include in some cases a limited -turnkey- bid including erection/installationand engineering. Civil works would not be included in any of the proposed equipment supply/erection packages. A total of 54 packages at a base cost of US$106 million equivalent have been defined with the 5 sponsors for the 6 appraised subprojects; of these, 4 packages for a combined base cost of US$43.4 million (or 41% of all ICB packages) exceed US$5 million equivalent in base costs, and another 14 packages for a combined base cost of US$31.2 million equivalent (or 29% of the total) exceed US$1.5 million equivalent. Prior Barnkreview of bid awards would be required for all contract packages exceeding the equivalent of US$1.5 million. This would ensure that i8 packages valued at a total US$75 million in base costs and representing 70% by value of all contracts expected to be awarded following ICB would be subject to prior Bank review. The remaining packages average US$1 million equivalent base cost and may be bid singly or grouped at the bidder's preference. The packages are sufficiently attractive to stimulate interest among foreign bidders. The bie packages for the seventh subproject are expected to follow a similar pattern. Consultant services would be procured following IBRD guidelines. For Part B, ICICI's standard bidding procurement procedures, which are based on the evaluation of at least three quotations, and used in other line of credit ope ,tions with ICICI will be followed; only the direct foreign exchange content of equipment purchases will be financed by the Bank loan. In accordance with DFC practice, eligible expenditures incurred up to 90 days prior to the Bank's receipt of a subloan application would be eligible for financing. Procurement arrangements are summa.ized in the table below. Details of the bid packages by subproject and estimated costs are in the Project Files Items 5-1 to 5-6.

11/ A minor amount of equipment procurement under Part A would be on the basis of international shopping to ensure compatibility with existing facilities. The total amount of such procurement would be less than US$3.0 million equivalent, mainly comprising diesel generating sets at the ACC plants, and other miscellaneous items. - 35 -

Table 5.4

Procurement Arrangements (US$ million)

Project Element Procurement Method Total ICB LCB Other Cost Parts A & Cl Equipment & spares 141.4 57.6 3.0 202.0 (141.4) - (3.0) (144.4) Land & civil works 14.1 31.5 - 45.6 (14.1)a/ (14.1) Infrastructure - 4.4 - 4.4 Erection/start-up - 13.1 - 13.1 Project Management 8.7 8.7 Training Programs 0.8 0.8 (0.6) (0.6) Technical Assistance 3.6 3.6 (2.9) (2.9) Equipment & Software for 1.5 1.5 Training Facilities (1.5) (1.5) Subtotal 155.5 106.6 17.6 279.7b/ (155.5) (8.0) (163.5) Part B Equipment & Spares 76.0c/ 76.0 (33.8) (33.8) Technical Assistance - - 1.6 1.6 (1.2) (1.2) Other - 11.2 - 11.2 Subtotal 87.2 1.6 88.8 (33.8) (1.2) (33.8) Part C2 Technical Assistance - - 1.0 1.0 (0.7) (0.7) Equipment - - 0.8 0.8 _ - (0.8) (0.8) Subtotal - - 1.8 1.8 (1.5) (1.5) Total 155.5 193.8 21.0 370.3 (155.5) (33.8) (10.7) (200.0) a/ Purchase of steel. b/ Not including interest during construction and taxes and duties. c/ Only direct foreign exchange expenditures are financed by Bank Loan.

Note: Figures in parentheses indicate accounts financed from proposed Bank Loan.

E. Allocation of the Loans and Disbursements

5.10 The allocation of the proposed Bank loans of US$200.0 million is detailed in Annex 6-3 and summarized below: - 36 -

Table5.5

India - Allcation of the Bank loam Part A Part x of eziditure Category andlCl Part B C2 Total % lob BeFinaxe

I. quipment& 130.0 30.0 0.3 160.3 80.2 Parts A andC: lOOZof spar foreign ependitures wx! 100% f lo cal e tures (ec-factory anst)

Part B: 100%of foreign expenditures

II. Crxultant's 2.5 1.0 0.8 4.3 2.2 100% Services

IlL kainig 0.5 - - 0.5 0.3 100%

IV. TUmalJlocated 30.5 4.0 0.4 34.9 17.5

1UrAL 163.5 35.0 1.5 Z).O0 100.0 - _= _ m

5.11 It is expected that, of those items to be financed by the Bank, about US$102.0 million (about 62% of the Bank loan to India) will be for contracts awarded to local suppliers following ICB. In order to simplify disbursement procedures and lower the administrative burden, letters of credit under Part A of the project would be established by ICICI for contacts valued at less than US$1.0 million equivalent witnout seeking the Bank's special commitment guarantee. Under the Bank loan to ICICI for Part B of the project, the same would apply for contracts valued at less than US$250,000. As ICICI has well established banking channels, this procedure would allow for speedier disbursements by eliminating prior review on about 70% of the expected contracts valued at about 30% of the total amount expected to be financed by the Bank loans (see also para 5.09).

5.12 The expected disbursement schedule of the proposed Bank loan is shown as Annex 5-7. It takes into account the advanced stage of procurement at several of the proposed conversion subprojects and uses the profile for private sector industrial and technical assistance projects in India and the South Asia Region. As all project sponsors are well organized for project management, the use of the standard profile results in a conservative forecast compared to what was achieved under the recently completed Tamil Nadu Newsprint Project (Loan 2050-IN), which was a greenfield site and involved more complex contracting arrangements. As for the loan to ICICI for Part B of the project, potential subprojects have been identified and commitments are expected to be made over the next 24-36 months. The subprojectswould all have shorter implementationperiods than the major conversion subporjects,and disbursements would be completed substantially by March 31, 1990 (i.e., at the end of the Seventh Plan - 37 -

Period) and fully by December 31, 1991. No retroative financing is proposed for this part of the Project. The bulk of the loan disbursements are on the loan to India, expected to take place during the first three years following loan signatures, and this loan is expected to be substantially disbursed for the major conversion projects by December 31, 1990, and fully disbursed for all components by December 31, 1991.

5.13 ACC and India Cements have signed or are expected to sign technical assistance contracts with overseas consultants for assistance in project management, technical bid preparation and review. A small amount of the loan to India would be disbursed against expenditures incurred after July 1, 1985, but not earlier than nine months prior to actual loan signature. A maximum of US$1.5 million may be expected to be disbursed in this manner.

VI. FINANCIAL ANALYSIS

A. Assumptions Used and Forecast of Production Costs

6.01 Details of the assumptions used in the financial projections for the six subprojects already appraised are provided in Annex 6-1. Appraisal of the seventh subproject would follow the same methodology and is expected to yield similar results. The projections are made through to the steady state in current terms when all the subprojects reach full capacity (90% capacity utilization)and held constant thereafter. The actual and projected unit cost of cement produced at each of the subproject plants is shown as Annex 6-2. In each of the six subprojects, the conversion from wet to dry process technology results in savings in coal consumption as detailed under Annexes 4-2 to 4-7 and that translates into financial savings as follows:

Table 6.1

Coal Cost Savings

Coal Cost/Ton of OPC Cement (1985 Rs) Difference Wet Dy (X)

ACC Madukkarai 239.9 153.3 -36.1 ACC Shahabad 194.2 98.2 -49.4 Birla Jute Satna Works 115.3 71.2 -38.2 CCI Mandhar (Slag Cement) 50.1 28.2 -43.7 ICL Sankarnagar (incl. Lignite) 222.0 131.6 -40.7 KCP Macherla 157.5 99.0 -37.1

The magnitude of the savings is expected to increase as coal prices are expected to rise about 2.5% a year in real terms. These savings translate into the main benefits of the conversion programs.

6.02 The production build-up assumes a realistic kiln capacity utilization of 70%, 80% and 90% in the three years after start-up (as - 38 - explained in para 3.05, l00X capacity utilization is defined at 90.4% usage by international norms). Sales revenues are projected using prices for levy and non-levy cement existing in 1985 through 1989/90. Full decontrol of cement is assumed from 1990/91, and a price of Rs 600 is used for the projections from that year onward, except in the case of the plants in Tamil Nadu and Karnataka which are located closer to major deficit areas (para 3.11). This is illustrated in the table below; the average price under decontrol is not substantially higher than the actual average net realization prices being obtained by the cement plants under existing controls.

Table 6.2

Ex-factory Price Assumptions (1985 Rs/ton)

Average Realization Dry (i.e., after Wet conversion) Future Decontrol

ACC Madukkarai 538 580 700 ACC Shahabad 494 525 630 Birla Satna 472 494 575 CCI Mandhar 477 499 600 ICL Sankarnagar 522 560 650 KCP 474 500 600

Note: Difference between wet and dry prices under existing controls is due to GOI rules under which levy quota on incremental production would be calculated on basis of new plants, thereby reducing the levy/non-levy ratio of 60/40 for the old plants to an average 50/50 (see Annex 6-1).

6.03 Operating cost estimates are based on a detailed evaluation of labor, raw material, coal, power of individual plants in the consolidated financial projections of multi-plant companies (i.e. ACC, Birla Jute and ICL) and overhead costs at existing operations as well as at each of the companies' plants (including those of the Project), which are planned to come into operation over the forecast period. In the case of KCP and Birla Jute, the consolidations include company projections of sales, costs, and profitability at other non-cement operations. Coal prices are assumed to increase 2.5Z in real terms, in line with the expected realignment of coal prices as part of the organized coal sector development programs. Other operating zosts are assumed to remain constant in real terms. As seen in Annex 6-2, all the wet process plants in the private sector and the public sector are comparable, with the exception of ACC's Madukkarai and ICL's Sankarnagar plants, which have substantially higher costs of limestone quarrying and much higher coal prices due to their distance from the main coalfield belt (see Map 19204). These two plants therefore are running losses under current realization prices. The substantial improvement in coal efficiency will enable these and the other plants to achieve profitable operations. - 39 -

B. Financial Projections

6.04 A brief summary of the main companies' past performance and current financial position for the last five years is provided below and a more complete description iz in the Project File, Items 6-1 to 6-5 and summarized in Annexes 6-3 to 6-7. Forecast consolidated income statements, balance sheets and funds flow statements for each company are provided in Annexes 6-3 to 6-7 and summarized in tables under each section below. All the companies analyzed had historically been strong financial performers, have had sound capital structures and the pr..jectsare expected to enhance even further both their competitiveness and profitability. Except for CCI, all the companies are actively traded in the stock market, and are considered very attract:ivefor both institutional and individual investors. Even CCI has been able to raise funds in the financial markets through public debenture issues, which have been oversubscribed.

6.05 It is very important to note that although the financial projections have assumed that the production of the old wet process facilities being replaced will stop when the new dry-process units come onstream, five oi the six plants will be able to run both facilities concurrently until production from the new units is stabilized. In financial terms this means that production losses resulting during the start-up period will be minimal and that in all likelihood, sales revenues will be higher than forecast.

ACC (details Annex 6-3)

6.06 ACC. The company is the leader in the cement industry accounting for about 25% of the domestic cement production. Owing mostly to levels of capacity utilization well above the industry's average and good overall operating efficiency, ACC has had profitable years prior to the partial decontrol of the cement prices. In addition ACC has avoided significant production losses through the installation of captive power plants which can now meet about 60% of its power requirements. With the impact of decontrol, average return on net worth has improved to 18.5% compared to 13.5% for the period 1977/78-1981/82. At the end of the current fiscal year, ACC's financial position remained sound with a current ratio of 1.3, a debt/equity ratio of 64/36 and a debt/service coverage of 2.2 times. Dividend payout ratio for the last five years has averaged 17.2%.

6.07 The company's cement production is expected to increase by 31% from 7.3 million tons in 1984/85 to 9.6 million tons in 1991/92, when, apart from other ongoing projects, both Madukkarai and Shahabad are expected to reach steady state. At this production level, ACC will continue to remain the largest cement manufacturer in India. As a result of the benefits derived from other ongoing projects and the Bank project, namely: {i) improved power and fuel efficiency with dry and semi-dry process as opposed to wet process technology; and (ii) lower labor costs per ton due to economies of scale from larger sized plants, operating profits will more than double from 14.1% to 28.9% by 1991/92. Similarly, over the same period, cost of goods sold as a percentage of sales will decrease by 14% from 91% to 78%. - 40 -

Table 6.3

India-- CementIndustry Project Acr.- Conslidated FinancialProjections (in current Rs millions)

1985 1986 1987 1988 1989 1990 1991 /86 /87 /88 /89 /90 /91 /92

CapacityUtilization (Z) 84 89 89 89 89 89 89 Sales Revenues 5,479 6,306 6,771 7,563 8,230 10,579 11,195 Profit After Tax l11 274 195 278 371 1,154 1,113 InternalCash (Bef. Int.) 960 942 1,177 1,319 2,077 1,928 1,864 Debt Service 516 519 636 630 522 1,455 486 PAT/Sales(Z) 2.0 4.3 2.9 3.7 4.5 10.9 9.9 CurrentRatio 1.7 1.4 1.3 1.4 1.3 1.5 2.1 Debt/EquityRatio 62/38 62/38 62/38 60/40 54/46 37/63 29/71 Debt ServiceCoverage Ratio 1.4 1.9 1.8 1.9 2.4 1.4 4.0

6.08 The table above shows that the Company's total sales are expected to grow about 132 p.a. over the next seven years. During the period 1989/90 onwards when production from the new units takes place, sales revenues rise rapidly and the Company's profitability improves acrordingly although by 1991/92, after-tax profits decline slightly as the tax burden becomes heavier with the expiration of tax incentives. The ability of the Company to service its obligations to existing and proposed project lenders appears adequate. As a result of demands placed on its cash generation during 1986/87-1988/89to support not only the Project, but also other substantial capital expenditures, ACC will resort to short-term borrowings during the project implementation period to cover its working capital needs. This will result in a mild deterioration of the current ratio from 1.4 in 1986/87 to 1.3 from 1987/88 through 1989/90. The large rise in debt service in 1990/91 is a result of the redemption of non-convertible debentures being used to fund ACC's ongoing capital expenditure program. Liquidity improves rapidly thereafter in line with increased sales revenues. The debt/equity ratio appears adequate at all times. A sensitivity test has been carried out assuming substantially lower net realization prices for the company as a whole, either due to delays in GOI decontrol policy or due to temporary oversupply in the market leading to a drop in free-market prices. Even if the total value of ACC's sales were to drop by 20% as a result, ACC's financial position remains satisfactory. Debt service coverage remains at around 1.5, and although profitability is substantially lower, it is still satisfactory at about 5% after tax. To ensure the maintenance of a sound financial position, no additional covenants, except those stated in para 6.23, will be required to be included in the ACC subloan agreements.

Birla Jute (details Annex 6-4)

6.09 Birla Jute. The diversified operations of Birla Jute, which include jute, cement, carbide and synthetics, have helped the company maintain a fairly steady performance for the last two decades despite the l - 41 - poor performance of its jute division which accounts for 15% of total sales. The cement division, which started commercial operations in 1959, and at present accounts for 66% of total sales, has consistently helped Birla Jute maintain steady earnings growth. After the commissioning of the Vikas plant adjacent to its Satna plant in November 1984, Birla Jute's cement capacity increased to 2.4 million tons, thereby lifting the state of Madhya Pradesh to top position among cement-producingstates (para 2.10). The cement division has also had to contend with numerous infrastructural problems but has sought to minimize the impact of power shortages through the installation of captive units which now account for more than half of its requirements. Following the initial effect of partial decontrol in 1981/82, return of net worth has declined from 19.8% to 4.9% in 1983/84, mainly as a result of higher depreciation charges, but the company reduced the level of dividend payments substantially in order to finance the additional fixed assets with minimal borrowing. The Company, however, remains highly attractive to investors and its first ever public issue of convertible debentures in 1984 was oversubscribed six times. At the end of the current fiscal year, the company's debt/equity ratio stood at 28/72, current ratio at 1.8 and debt service coverage at 1.7 times.

6.10 The Company's cement production is expected to increase from 1.9 million tons in 1984/85 to 2.7 million tons in 1990/91, a 42% increase, when both the Chittorgarh and the Satna plant would have achieved expected steady state. The increase in cement production and the benefits derived from converting from wet process to the more fuel-efficientdry process technology are expected to reduce cost of goods sold as a percentage of sales by 15% from 72% in 1984/85 to 61% in 1991/92.

Table 6.4

India- Cement IndustryProject Birla Jute - Consolidated Financial Projections (in current Rs millions)

1985 1986 1987 1988 1989 1990 1991 /86 /87 /88 /89 /90 /91 /92

Capacity Utilization (Z) a/ 80 82 79 78 82 83 85 Sales Revenues 1,495 1,655 1,826 1,989 2,490 2,850 2,933 ProfitAfter Tax 189 228 249 244 397 477 503 Internal Cash (Bef. Int.) 402 457 485 528 742 822 821 Debt Service 136 134 155 145 202 178 192 PAT/Sales (%) 12.6 13.8 13.6 12.3 15.9 15.9 16.7 Current Ratio 1.7 1.7 1.7 1.9 2.0 2.3 2.6 Debt/Equity Ratio 30/70 29/71 32/68 31/69 27/73 22/78 13/87 Debt ServiceCoverage Ratio 3.0 3.4 3.1 3.0 3.7 4.6 4.3 a/ Of cementoperations only.

6.11 As indicated in the table above, the Company is expected to maintain a strong financial position throughout the implementation of the Project and thereafter on account of its solid capital structure. - 42 -

Throughout the period 1986/87-1991/92the debt service coverage is 3 or higher, even when the Project's maturities become due in 1989/90. Also in this period, net profit as a percentage of sales ranges between 13_17Z and debt/equity ratio is not higher than 32/68. Birla Jute's overall cement manufacturing facilities will be relatively new after the conversion of the Satna plant; after decontrol, its average retention price will only increase about 20X compared to ACC, which has a higher proportion of older plants. Birla Jute's operations are substantially more robust as a result. A sensitivity test indicates that the Company could sustain a total sales drop of over 30% through a combination of stagnant prices and low volumes before any of the critical financial ratios (debt service coverage, current ratio, profit after tax) would be impaired. No additional covenants, other than those mentioned in para 6.23, will be sought in the Birla Jute subloan agreement.

CCI (details Annex 6-5)

6.12 CCI. Despite low profitability or losses during the late 1970s, mostly associated with inadequate retention prices, high depreciation and interest charges of new units and infrastructural problems, the Company's financial situation remained sound, reflecting the conservative financing of CCI's past projects which, according to Government practice, were financed 50% debt and 50X equity with equity funds being provided first. In the period 1981/82-1982/83profits soared to an average of 50% of sales, not only as a result of decontrol, but also to high levels of capacity utilization (83%) and that the company marketed 7.2 million tons of imported cement. Although profits have fallen due to increased input costs and higher depreciation charges, at the end of 1984/85 debt/equity ratio stood at 45/55, current ratio at 1.3 and debt service coverage at 1.2 times.

6.13 CCI's cement production is expected to increase almost threefold during the next six years, when all its ongoing projects including the Mandhar project would have achieved steady state. As a result, total production will grow from 1.9 million tons in 1985/86 to 5.1 million tons in 1990/91 thus becoming the second largest cement producer in india after ACC. Due to the resulting benefits that will accrue from improved economies of scale (i.e., by 1990/91 CCI will operate four plants with capacities between 750,000-1,000,000tons per year) and reduction in operating costs attributed to the ongoing modernization conversion projects costs of goods sold as a percentage of sales will decline from 88% in 1984/85 to 67% in 1990/91. - 43 -

Table 6.5

India- Cement IndustryProject CCI - Consolidated Financial ProJections (in current Rs millions)

1985 1986 1987 1988 1989 1990 1991 /86 /87 /88 /89 /90 /91 /92

CapacityUtilization (Z) 77 76 79 80 80 80 80 Sales Revenues 1,603 2,005 2,876 3,423 4,191 5,353 5,743 Profit After Tax (190) (15) 276 362 430 521 490 Internal Cash (Bef. Int.) 319 620 949 1,080 1,286 1,521 1,443 Debt Service 411 430 859 578 638 550 718 PAT/Sales (Z) (12) (1.0) 10.0 10.6 10.2 9.7 8.5 CurrentRatio 2.0 1.8 1.3 1.4 1.6 1.9 2.2 Debt/EquityRatio 45/55 51/49 39/61 41/59 38/62 33/67 24/76 Debt ServiceCoverage Ratio 0.8 1.5 1.2 2.2 2.3 3.0 1.9

6.14 As shown in the above table, CCI's total sales are projected to grow at about 24% p.a. Profit after tax as a percentage of sales will turn around from a loss in 1985/86-1986/87 as a result of heavier depreciation and interest charges of the new projects of Tandur and Neemuch to 10.6% in 1988/89 when all the projects are at a steady state, although it will decrease thereafter as a result of higher income tax payments. In all probability, however, profits will be higher since further investments will be made to shield taxable income. The ability of the Company to service debt of the ongoing and future projects is tight in 1985/86, when the major expansion projects now under way are not yet been commissioned and the Company's cash generation is low; however, starting in 1986/87, cash generation improves rapidly and debt service coverage remains adequate throughout the remainder of the period. CCI's long-term debt/equity ratio which has been satisfactory in the past, reflecting the Government's conservative financing practice (50% debt; 50Z equity) for new projects, will remain so mainly due to the increase in cash generation after decontrol. A sensitivity test has been carried out on CCI's ability to weather any adverse stagnation of cement prices. As in the other cases, CCI's net sales value could fall by at least 25% (implying stagnant prices and a 10% drop in production), before its ability to service existing and projected debt would be impaired. The Corporation has not projected any additional long-term borrowings. No additional covenants other than those mentioned in para 6.23 will be sought in the CCI subloan agreements.

ICL (details Annex 6-6)

6 15 ICL. Owing to increased capacity utilization resulting from the availability of additional captive power, improved performance of the Company's quarrying operations and the impact of partial decontrol, ICL's financial situation has improved gradually since 1981/82. For example the debt/equity ratio improved from 71/29 at the end of 1981/82 to 38/62 at the end of 1984/85. Debt service ranged between 1.7 and 3.8 times during the same period while its current ratio (excluding customer advances from - 44 - current liabilities) is a satisfactory 1.8. On account of losses carried forward and investment allowance resulting from recent capital investments in quarry modernization, ICL has effectively shielded a large part of profits from taxation. During the period 1979/80-1981/82 the company did not pay dividends, but resumed dividends in 1982/83; over the last three years, dividend payout ratio has averaged 16.2%.

6.16 By expanding the Sankarnagar plant capacity to 3,000 TPD, India Cements expects to double its sales revenue from Ras958 million at present to Rs 1,885 million in 1992 when the Project reaches its steady state. In the meantime, a comprehensive renovation and maintenance program is being carried out to keep both Sankarnagar and Sankari plants operating at a high level of capacity utilization until the Project is completed. While the total financing requirements of both investments (about Rs 1.036 million) will strain the Company's financial position, ICL's profitability may be affected only during 1988/89-1989/90due to the more than doubling of depreciation and interest charges. ICL has, however, put together a financing plan which includes the following innovative features: (i) a convertible debenture issue in 1986/87 of Rs 98 million on a rights basis of which 25% will be converted at a Rs 5 per share premium; (ii) a rights issue of Rs 36 million in 1987/88; and (iii) an equity linked non-convertible debenture issue of Rs 98 million in 1987/88. These features which would raise nearly 25% of the funding needs for the major conversion project and would serve to reduce the debt service burden due to the conversion features (which essentially capitalizes interest during the project implementation period and issues equity shares in lieu of the capitalized interest payment at project completion).

Table 6.6

India- Cement IndustryProject ICL - Consolidated Financial Projections (in current Rs millions)

1985 1986 1987 1988 1989 1990 1991 /86 /87 /88 /89 /90 /91 /92

CapacityUtilization (%) 101 101 101 90 80 85 90 Sales Revenues 1,090 1,217 1,308 1,290 1,424 1,911 2,017 ProfitAfter Tax 13 111 125 11 (15) 359 373 InternalCash (Ref. Int.) 71 199 219 168 246 604 605 Debt Service 48 60 72 104 192 190 189 PAT/Sales(Z) 1.2 9.1 9.5 0.8 (1.0) 19.0 18.5 CurrentRatio 1.5 2.0 2.3 2.0 1.9 2.8 3.4 Debt/EquityRatio 60/40 69/31 73/27 72/28 73/27 58/42 46/54 Debt ServiceCoverage Ratio 1.5 3.3 3.0 1.6 1.3 3.2 3.2

6.17 As shown above, heavy demands will be placed on the Company's cash generation during the wind-up of project implementationwhen both payments of interest and principal on long-term debt reach about 78% of cash generation. In this year also, debt service coverage is at the lowest point of the forecast period but recovers quickly in the following years as - 45 - the Project increases capacity utilization and the initial impact of price decontrol is felt. In 1990/91, ICL would also convert a part of the debenture issues being used to fuikd its conversion project. This results in a lower debt service burden and consequent improvement of ICL's liquidityposition. Similarly, as retained profits increase quickly (partlyas a result of tax shields), ICL's debt/equity position also improves rapidly to a comfortable 58/42 in 1990/91. ICL's average retention price is expected to increase only about 17%, after decontrol, as the Company presently realizes a substantial premium on free market sales due to its advantageous location in a deficit-riddenarea. A sensitivity test has been carried out on ICL's ability to withstand a stagnant cement price situation and a lower sales volume. The results indicate that ICL's sales would need to fall over 25% before the Company's ability to service its total debt obligations and maintain satisfactory liquidity is impaired. ICL's liquidity will remain sound throughout the period, never falling below 1.5.

KCP (details Annex 6-7)

6.18 KCP. The Company's activities include cement, sugar, engineering and distillery operations. Cement sales turnover accounts for about one third of total revenues. Unlike southern cement plants, KCP's unit has not been hampered by power shortages. Furthermore, management's close attention to the operations of the cement plant, and various modernization programs implemented during the last ten years, have produced levels of capacity utilization which are among the highest in the industry. For the last ten years KCP has sustained profitable operations, the company is conservativelymanaged and has relied mostly on internal funds and long-termdebt to finance capital investments. The current ratio has improved from 0.8 in 1980/81 to 1.8 in 1984/85 and it would be much higher if advances from customers, which represent a claim on future production rather than a cash liability are excluded. At year end 1984/85 the Company's debt/equity ratio stood at 38/62 and its debt service coverage at 1.6 times.

6.19 KCP's total sales revenue is projected to increase by 40% from Rs 796 million in 1985/86 to Rs 1,122 million in 1990/91 as a result of more than doubling its cement sales revenue, and a 73% increase in sugar sales revenue due to the expansion of the Company's sugar cane crushing facilities. Sales of the engineering unit are forecast to decrease by about one fourth to reflect conservatively the competitive situation of the equipment manufacturing industry. - 46 -

Table 6.7

India - CementIndustry Project KCP- Consolidated Financial Projections (in current Rs millions)

1985 1986 1987 1988 1989 1990 1991 /86 /87 /88 /89 /90 /91 /92

CapacityUtilization (Z) a/ 95 95 70 80 90 90 90 SalesRevenues 796 799 830 903 1,010 1,122 1,178 ProfitAfter Tax (PAT) 51 27 (28) 11 49 105 107 InternalCash (Bef.Interest) 112 95 112 119 128 164 156 Debt Service 43 52 80 96 106 56 47 PAT/Sales(Z) 6.4 3.4 (3.4) 1.2 4.8 9.3 9.1 CurrentRatio 2.0 1.9 1.7 1.6 1.7 1.8 1.8 Debt/EquityRatio 38/62 48/52 48/52 44/56 33/67 24/76 20/80 Debt Service Coverage Ratio 2.6 1.9 1.4 1.2 1.2 3.1 3.3

a/ Of cement operations only. 6.20 Althoughthe Companywill experiencelosses in 1987/88and low profitabilityin 1988/89-1989/90due to lower capacityutilization during start-upof the new dry-processfacilities and higherdepreciation and interestcharge also associatedwith the new equipment,KCP's financial positionwill remain good with adequatecash generationto servicedebt. In fact the lowest level of projecteddebt servicecoverage of 1.2 occurs only in 1988/89-1989/90and quickly improvesto 3.1 in the followingfiscal year. On the whole, the Company'sprojected financial position is sound and its forecastrevenues dependable based on its past ability to sustain productionat highest level of capacityutilization. Liquiditythroughout the period is adequateat all times with currentratio never fallingbelow 1.6 and the low debt/equityposition at all times will supportthe planning of futurecapital investment. KCP's cement operationsare sufficiently robust to withstandcontinued price stagnantionand lower sales volumes. As the Company'sfinancial position is strong,a sensitivitytest shows that cementsales could drop by over 20% beforeKCP's abilityto service its existingand future debt burden or to maintainsatisfactory liquidity would be impaired.

C. FinancialRate of Return

6.21 The financialrates of return for the six plants are summarized in Table 6.8 below and the detailsare given in Annex 6-8. A sensitivity test on key assumptionsas regardsdecontrol prices, capitalcost increases and projectimplementation has been performedand resultsare indicatedin the table below. The tests indicatethat all conversionsubprojects are robust even at the extreme assumptionthat averagerealization prices would remain stagnantunder decontrol. The switchingvalue indicatedin the table is the percentageof sales value (i.e.,price times volume)at which the TRR falls below 12%. - 47 -

Table 6.8

India - Cement Industry Project Financial Rate of Return Analysis (Pre-Tax) Subprojects (Z)

25% Without Increase Price in 6-month Increase Switching Base Capital Delay in after Value Case Cost Start-up Decontrol a/ (X)

[adukkarai, ACC 18.1 16.5 16.9 14.5 70 Shahabad, ACC 20.6 17.8 18.1 17.5 68 Satna, Birla Jute 20.5 18.1 17.9 18.5 64 Mandhar, CCI 28.2 26.0 24.1 24.5 50 Sankarnagar, ICL 22.6 20.1 18.8 19.3 58 Macherla, KCP 37.3 34.5 33.6 31.4 45 a/ I.e., at current average realization prices (Table 6.2).

D. Financial Covenants, Auditing and Reporting Requirements

6.22 Audit of public sector accounts is performed at three distinct levels: continuous audit by the company's internal audit department; year-end audits by the statutory auditors; and audits by the Auditor General's office as required of all public sector enterprises. The private sector has to abide by the first two levels. The internal control and accounting systems employed by all project entities are well maintained and provide a satisfactory basis for management control and decision making. The subloan agreements would provide for (i) audit reports by the company's statutory auditors to be submitted within four months of the end of the Company's fiscal year; and (ii) periodic project progress reports and financial statements to be submitted on a timely basis. Reporting to the Bank by ICICI/IDBI as the financial intermediarieswould follow the above schedules. After completion of the Project, each company will be requested to prepare and furnish a comprehensive report on the Project, its implementation, initial operation and the costs and benefits derived and expected to be derived therefrom. Audits of ICICI's and IDBI's financial performance will follow existing practice. The two institutions will prepare Project Completion Reports along established lines.

6.23 To ensure the maintenance of a sound financial position, in addition to the covenants relating to the financing of the Projects (para 5.05), subloan agreements will provide for the following: (i) the companies will maintain a current ratio of not less than 1.2 times and a debt/equity ratio not greater than 67:33; and (ii) the companies will not incur additional debt if to do so would cause the companies' debt/equity to exceed 67:33 or its projected debt service coverage to fall below 1.5 times. - 48 -

VII. ECONOMIC ANALYSIS

A. Assumptions Used

7.01 Amounts for capital and operating costs used in the financial projections have been adjusted in the economic analysis by excluding taxes and duties contained therein. Power, which represents approximately 20% of the financial operating costs for the Project, has been adjusted upwards to reflect its economic costs. The economic cost of power is estimated to be 1.5 times the prevailing electricity tariff rates. In the case of coal, economic costs are assumed to be equi alent to the financial costs. The quality of coal received at the cement plants is of very poor quality, the ash content varying from 30% to 40%, and thus assumed non-tradable. All other costs are adjusted by using the standard Conversion Factor of 0.82 for India. The output of the Project is valued at the 1985 price of imported cement, C&F Indian ports, of US$55 per ton. This is based on current FOB prices Mediterranean ports and Korea of around US$27/ton for bagged cement and about US$23/ton C&F charges to Indian ports, plus port handling and insurance charges of Rs 119/ton. If cement could be imported' in bulk carriers, the average costs/ton delivered Indian ports would be US$37/ton to which local handling and packing charges would add another Rs 195/ton, thus providing a total price for bagged cement at the border of US$52/ton (at US$1 - Rs 13). The sensitivity test in Table 7.1 above assumes a situation where international prices fall to a long-term low of US$20/ton for bulk cement, and a minimal US$15/ton for transport to India, plus local handling and packing charges of only US$13/ton (Rs 169/ton), thus giving a long-term low international price of US$48/ton.

B. Economic Rate of Return

7.02 The economic rates of return for the subprojects already appraised and the sensitivity tests are summarized below and detailed in Annex 7. The switching value is calculated as the percentage of sales value (i.e., price times volume) at which the economic rate of return falls below 12%. A sensitivity test has also been carried out with other combinationsof adverse events, including a 25% increase in capital costs and a drop in output prices to US$45/ton. In all cases, the economic rate of return remains above 12%. - 49 -

Table 7.1

India - Cement Industry Project Economic Rate of Return Analysis Subprojects

25% Increase in 6-month Output Switching Base Capital Delay in Value at Value Case Cost Start-up US$48/ton (%)

Madukkarai, ACC 21.5 18.5 18.8 14.0 68 Shahabad, ACC 25.2 21.5 22.4 17.5 65 Satna, Birla Jute 25.0 23.2 24.0 20.5 59 Mandhar, CCI 31.1 28.5 29.1 24.1 55 Sankarnagar, ICL 31.0 29.0 30.0 23.5 58 Macherla, KCP 50.9 47.6 48.4 35.4 45

C. Other Benefits

7.03 Aside from the foregoing quantifiable benefits, the chief impact of the Project will be to increase domestic supplies of cement - the combined incremental output of the Project by 1992/93 is estimated at 1.3 million tons or 2.2% of projected domestic demand in that year. The Project will thus contribute to the development of the Indian economy by reducing future shortages of this basic commodity, the periodic unavailability of which in the past has created severe bottlenecks and disruptions to economic activity in user industries. The Project will also create substantial additional employment among domestic equipment manufacturers, which are expected to supply about 65% to 75% of the equipment requirements for the Project, and in downstream industries, particularly in the construction sector.

7.04 The Project will also play a role in institution building through the provision of outside technical assistance to strengthen the various sponsors' expertise in the implementation and operation of large-scale projects. The technical assistance component, to be established under the Project, will also contribute to the pool of in-house expertise and enhance the companies' expertise.

D. Major Risks

7.05 The mission identified a number of risks which could affect the projects, and evaluated their likely impact.

General Project Risks

7.06 Inefficient ImplementationCapability and Project Delays. Sufficient capabilities for project evaluation, design, management and implementation have been developed in India. Practically all large industrial concerns have developed their own design and engineering staff, and some have entered equipment manufacturing as well. Some of the smaller - 50 - cement companies cooperate directly with the equipment manufacturers for design and engineering. All of the project sponsors have assembled competent staff, and most of the companies have recent experience in project design and execution. In addition, all sponsors have retained competent and experienced consultant/engineersto assist in most or all phases of project implementation. With regard to past complaints against local manufacturers for delays in the supply of equipment, it should be noted that many of the time-consuming procedures for import of materials and components have been removed. Indian suppliers do not have heavy order books at this time, and it appears that they can observe the 18-month maximum delivery time, which is generally assumed to be the international | norm. All foreign suppliers are underbooked and operate with minimum delivery times. The considerable activity experienced within the construction sector during the last three years has permited construction contractors to mechanize and become efficient, and this subsector should have ample capacity to permit compliance within the schedules.

Non-attainment of Rated Output Due to Various External Factors

7.07 Power Cuts. This has been a serious problem during recent years. During the years 1979/80 up to 1982/83 an average 10.6% of rated production was lost I?-S we of power cuts, which to a large extent were caused by a drought situation. In spite of heavy investments, power generation will remain a problem in some of the states; however, the cement industry has overcome this problem to a significant degree by installing captive power-generating capacity. For example, all companies under the project can generate between 20-65% of their power needs thus reducing substantially the impact of power shortages. Although their use of captive power is more expensive than normal electricity, it is economically desirable if the alternative is to stop production.

7.08 Coal Supplies and Rail Transport Capacity. The timely and adequate supply of coal to the indian economy (the worlds fifth largest consulmerin terms of tonnage of hard coal) will remain a major challenge for many years to come. The most recent estimates 12/ indicate that thermal coal supply and demand will be broadly in balance through 1989/90 (although large pithead stocks were built-up in 1983/84) and occasional surpluses and shortages may arise in particular years depending on the future performance of the economy. To this extent, the fuel savings created by wet to dry conversions will reduce the coal tonnage and would enable the companies to perform better within their present coal allotments. On the other hand, rail transport capacity, which has suffered from under-investment for the past decade, will be slow in meeting full traffic demand. While the measures taken 13/ to improve the Indian railroads are expected to result in future improvements in coal haulage, some disruptions can be expected in the future. In the past, the impact of these shortages on the cement industry has not always been fully

12/ India - Duchichua Coal Project, February 28, 1984 (Report No. 4714-IN). 13/ India - First and Second Railway Modernization and Maintenance Pro-ects, July 1978 and October 1982. - 51 -

identified. GOI is now limiting the issuance of new licenses to projects located in areas where rail capacity appears adequate. However, even if these problems persisted through the life of the Project, it is unlikely that capacity utilization would fall below 70-75%. Even at such levels (which are below average historical capacity utilization of the companies analyzed), the economic rate of return of the companies would remain between 16% and 25%, underlying the desirability of the proposed investment.

7.09 Financial Viability. A final risk relates to the future financial viability of the companies, should decontrol measures be implemented more slowly than has been assumed in the financial projections (Annex 6-1). This could lead to future shortages in the company's internal cash generation. Since partial decontrol in early 1982 and the more recent relaxation of the levy quotas (para 2.14), the resulting higher average price has strengthened the financial position and profitability of the companies. Furthermore, the level of debt required is considered well within their borrowing capabilities on account of their strong capitalization at the end of 1984/85. In any case, the future retention price of Rs 600/ton which has been assumed after full decontrol is, on the average, only about 18% higher than the average retention price which the companies are now realizing under existing controls. As the bulk of the incremental benefits in each subproject originates from improved fuel consumption, overall gains in efficiency and incremental production, due to the conversion process, the risk that decontrol may not be effected as predicted, is minimal. Economic and financial rates of return show relatively little change as the economic price assumed is close to the average realization prices presumed to prevail after decontrol; as discussed in paras 6.04-6.20, the financial situation of the companies is robust enough to withstand the lower cash generation.

VIII. AGREEMENTS REACHED

8.01 The Government has confirmed its intent to achieve its policy objectives with regard to the cement subsector substantially by the end of the Seventh Five-Year Plan period (para 2.10).

8.02 The following agreements have been incorporated in the loan documents:

(a) ICICI and IDBI would ensure in the subloan agreements that, if such investments are not already a part of the subproject under consideration, the beneficiary companies undertake to install and maintain environmental control equipment and facilities at the project sites that would comriy with existing pollution control standards (para 4.14).

(b) GOI would onlend US$163.5 million equivalent of the loan to ICICI and IDBI in equal proportions and on terms and conditions satisfactory to the Bank, for the purposes of carrying out Parts A and Cl of the project (para 5.06). - 52 -

(c) GOI would pass US$1.5 million equivalent of the loan to ICICI as, a non-reimbursable grant for the purposes of carrying out Part C2. of the project (para 5.06).

(d) ICICI would use the proceeds of Part B of the project under project selection and appraisal criteria deemed satisfactory by the Bank; that for all projects whose requirement for funding out of the proceeds of Part B exceeded the equivalent of US$6 million, the appraisal report would be presented to the Bank for prior review before ICICI agreement to fund the said project (paras 4.14 and 5.06).

(e) ICICI and IDBI would ensure that periodic reporting arrangements were maintained by subborrowers in a manner deemed satisfactory by the Bank, and that they and the subborrowers prepare a comprehensive report on their respective subprojects, their implementation, initial operations, and their costs and benefits derived and expected to be derived therefrom (para 6.22).

(f) ICICI and IDEI would execute subloan agreements under Part A of the project that include financial covenants providing, inter aLia, for: {i) arrangements for adequate overrun financing on terms and conditions deemed satisfactory by the Bank (para 5.05); (ii) maintenance of financial position and capital structure ratios deemed satisfactory by the Bank (para 6.23); and (iii) limitations on assumption of new debt, unless ratios of financial position were maintained at stipulated levels (para 6.23).

8.03 The following are conditions of effectiveness of the Bank loan to India:

Ca) The signature of Subsidiary Loan Agreements between GOI and ICICI and IDBI for use of funds allocated to Parts A and Cl of the Project (para 5.08).

(b) The signature of a Grant Agreement between GOI and ICICI on use of funds allocated to Part C2 of the project (para 5.08).

No special conditions of effectiveness attach to the Bank loan to ICICI.

8.04 The signature of Subloan Agreements with each of the beneficiary companies for each subloan under Part A of the project Ls a condition of disbursement for that subloan (para 5.08).

8.05 On the basis of the preceding agreements and assurances, the Project is suitable for a Bank loan of US$165 million to the Republic of India on standard World Bank terms and a Bank loan of US$35 million to ICICI with guarantee of the Republic of India, on standard World Bank terms.

Industry Department December 1985 53- I ANNEX 2-1 INDIA - CEMENTINDUSTRY PROJECT SIZE DISTRIBUTION OF CEMENT PLANTS (IN NUMBER OF PLANTS) AS AT Apr-83 Apr-84 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-9O PLANT SIZE IN TPY

> 1.000.000 4 6 8 10 14 17 19 20 500,000 - 1,00,.000 22 22 27 28 29 30 33 35 300.000 - 500,000 24 25 25 24 23 22 20 19 < 300,800 16 18 18 18 18 19 18 17 Mini & Special Plants 18 23 27 47 63 74 74 74

Total 84 94 105 127 147 162 164 165 SIZE DISTRIBUTION OF CEMENTPLANTS (IN X OF TOTAL NUMBER) AS AT Apr-83 Apr-84 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-90 PLANT SIZE IN TPY > 1,888,800 4.8 6.4 7.6 7.9 9.5 10.5 11.6 12.1 580,080 - 1,000,000 26.2 23.4 25.7 22.0 19.7 18.5 20.1 21.2 300,000 - 500.000 28.6 26.6 23.8 18.9 15.6 13.6 12.2 11.5 < 300,000 19.0 19.1 17.1 14.2 12.2 11.7 11.0 10.3 Mini & Special Plants 21.4 24.5 25.7 37.0 42.9 45.7 45.1 44.8 _ _ _ _ ------…__------Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 SIZE OISTRIBUTION OF CEMENT PLANTS (IN MILLION TPY) AS AT Apr-83 Apr-64 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-90 PLANT SIZE IN TPY > 1,000,000 5.210 7.919 9.944 12.010 15.210 18.810 21.919 21.919 500,000 - 1,000,000 14.964 14.964 17.689 18.589 19.839 21.149 22.589 24.169 300,000 - 500,80 9.782 10.202 10.202 9.802 9.806 9.340 8.880 8.500 < 300,000 3.256 3.790 3.790 3.790 3.786 3.662 3.831 4.081 Mini & Special Plants 0.585 0.757 0.990 1.853 2.546 3.198 3.198 3.198

Total 33.797 37.632 42.615 46.044 51.187 S6.159 60.417 61.867

Average Size ('000 TPY) Large Plants 503 S19 535 553 581 603 637 646 Mini Plants 33 33 34 38 38 41 41 41 SIZE DISTRIBUTION OF CEMENTPLANTS (IN Z OF TOTAL CAPACITY) AS AT Apr-83 Apr-84 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-90 PLANT SIZE IN TPY > 1,000,000 15.4 21.0 23.3 26.1 29.7 33.5 36.3 35.4 SOO,000 - 1,000,000 44.3 39.8 41.5 40.4 38.8 37.7 37.4 39.1 300,000 - 500,000 28.9 27.1 23.9 L21.3 19.2 16.6 14.7 13.7 < 300,008 9.6 10.2 8.9 8.2 7.4 6.5 6.3 6.6 Mini & Special Plants 1.7 2.0 2.3 4.0 5.0 5.7 5.3 S.2 _ _ _ _ ------__------_ _ _ _ _ ------Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 ;00.0 Industry Department October 1985 - 54 - ANNEX2-2 INDIA - CENT INDUSTRYPROJECT REGIONAL CAPACITY BUILDUP (IN MILLION TONS) as at Ot Apr-83 Apr-84 Apr-85 Apr-86 Apr-87 Apr-88 Apr-89 Apr-90 <----ACTUAL----<------FORECAST…------Northern 7.935 7.935 9.161 9.235 9.238 9.801 10.201 10.201 Eastern /1 4.151 4.468 4.633 4.742 4.892 5.152 5.152 5.152 Western 11.376 12.551 13.637 16.053 17.880 21.385 23.138 24.038 Southern 10.335 12.678 15.184 16.014 19.177 19.821 21.926 22.476

Total 33.797 37.632 42.615 46.044 51.187 56.159 60.417 61.867 of which Mini Plants 0.585 0.757 0.922 1.785 2.412 3.064 3.064 3.064 of which Public Sector 6.306 7.017 7.582 7.582 8.582 10.842 11.242 11.542 Private Sector 27.491 30.615 35.033 38.462 42.605 45.317 49.175 50.325

of which pre-1982 plants 1o.911 16.911 16.911 16.911 16.911 16.911 16.911 16.911 post-1982 plant 16.886 20.721 25.704 29.133 34.276 39.248 43.506 44.956

/1 Including Rohtas plant (capacity 620,000 t) prese-tly shut down In3talledCapacity b? Major Industr-GrouP3 (By Rank in 1984/85) ACC 7.206 8.806 9.366 9.366 9.366 9.566 9.666 9.966 Other Birla 4.445 4.445 5.985 8.051 B.051 8.051 9.026 9.026 CCI 2.219 2.219 2.619 2.619 3.619 4.879 5.279 5.579 UPSC 2.SB7 2.S87 2.587 2.587 2.587 2.S87 2.587 2.587 Birla Jute Ind. 2.381 2.381 2.381 2.381 2.381 2.711 2.880 2.880 Sahu Jain 7.120 2.370 2.370 2.370 2.620 2.620 2.620 2.870 JK Singhania 2.040 2.040 2.040 2.540 2.540 2.540 2.540 3.140 Bangur 0.840 0.840 1.925 1.925 1.925 1.925 1.925 1.925 India Cements 1.395 1.395 1.395 1.395 1.395 1.395 1.600 1.600 L & T 0.000 1.109 1.109 1.109 1.109 1.109 2.218 2.218

Total 25.233 28.192 31.777 34.343 35.593 37.383 40.341 41.791 of which Public Sector 4.806 4.806 5.206 5.206 6.206 7.466 7.866 8.166 Percentage Distribution of Installed Capacity by Major Groups ACC 21.3 23.4 22.0 20.3 18.3 17.0 16.0 16.1 Other Birla 13.2 11.8 14.0 17.5 15.7 14.3 14.9 14.6 CCI 6.6 5.9 6.1 5.7 7.1 8.7 8.7 9.0 UPSC 7.7 6.9 6.1 5.6 5.1 4.6 4.3 4.2 Birla Jute Ind. 7.0 6.3 5.6 5.2 4.7 4.8 4.8 4.7 Sahu Jain 6.3 6.3 5.6 5.1 5.1 4.7 4.3 4.6 JK Singhania 6.0 5.4 4.8 5.5 '.0 4.5 4.2 5.1 Bangur 2.5 2.2 4.5 4.2 3.8 3.4 3.2 3.1 India Cements 4.1 3.7 3.3 3.0 2.7 2.5 2.6 2.6 L & T 0.0 2.9 2.6 2.4 2.2 2.0 3.7 3.6

Total 74.7 74.8 74.6 74.5 69.7 66.5 66.7 67.6 of which Public Sector 14.2 12.8 12.2 11.3 12.1 13.3 13.0 13.2 Industry Department October 1985 e 55 - ANNEX 2-3

INDIA - CEMENT INDUSTRYPROJECT

REGIONAL PRODUCTIONESTIMATE (IN MILLION TONS) 83/84 84/85 85/86 86/87 87/88 88/89 89/90 {---ACTUAL---> Northern 5.348 5.643 6.492 6.794 7.349 7.872 8.242 Eastern /I 2.988 Z.810 3.074 3.291 3.734 4.030 4.191 Western 9.857 10.572 12.016 13.561 15.735 17.776 19.263 Southern 9.007 11.145 12.S48 13.639 15.388 16.852 18.169 ------Total 27.000 30.170 34.131 37.285 42.207 46.530 49.864 of which Mini Plants 0.322 C.635 0.885 1.281 1.704 2.147 2.316 Public Sector 4.107 4.246 4.777 5.336 6.686 7.984 8.632 Private Sector 22.893 25.924 29.353 31.949 35.520 38.626 41.233 pre-1982 plants 14.147 14.841 15.067 15.180 15.282 15.370 15.414 post-1982 plants 12.854 15.329 19.064 Z2.18526.9Z4 31.159 34.450 /1 Includingrestart of production from Rohtas plant in 1987/88 Productionby Major Industry Groups ocC 7.058 7.607 7.931 8.083 8.250 8.451 8.682 Other BLria Houses 3.790 4.176 5.332 6.205 6.481 6.855 7.309 cCI 1.995 1.994 1.984 2.254 Z.976 3.662 4.104 JK Singhania Group 1.776 1.906 2.010 2.198 2.247 2.278 2.493 Birla Jute Industries 1.757 1.887 1.936 1.960 2.132 2.259 2.358 Sahu Jain 1.280 1.443 1.450 1.573 1.880 2.049 2.248 India Cements 1.116 1.384 1.384 1.384 1.384 1.444 1.510 UPSC 0.967 0.906 1.138 1.299 1.506 1.677 1.858 BanQur 0.845 0.807 1.495 I.590 1.656 1.782 1.725 L & T 0.158 0.718 0.775 0.883 0.834 1.092 1.521

Total 20.734 2Z.828 25.435 27.348 29.345 31.468 33.802 of which Public Sector 2.962 '.900 3.122 3.553 4.481 5.349 5.954 Percentage OLstribution of Production by Major Industry Groups ACC 26.1 ZS.2 23.2 21.7 19.5 18.2 17.4 Ot:-er Blrla HoUSe5 14.0 13.8 15.6 16.6 15.4 14.7 14.7 CCI 7.4 6.6 5.8 6.0 7.1 7.9 8.2 JK Singhania Group 6.6 6.3 5.9 5.9 5.3 4.9 5.8 Birla Jute Industries 6.5 6.3 5.7 5.3 5.1 4.9 4.7 Sahu Jain 4.7 4.6 4.2 4.2 4.5 4.4 4.5 India Cements 4.1 4.5 4.1 3.7 3.3 3.1 3.0 UPSC 3.6 3.0 3.3 3.5 3.6 3.6 3.7 Bangur 3.1 2.7 4.4 4.3 3.9 3.7 3.5 L & T 0.6 2.4 2.3 2.2 2.0 2.3 3.0

Total 76.7 75.7 74.5 73.4 69.7 67.7 67.7 of which Public Sector 11.0 9.6 9.1 9.5 10.6 11.5 11.9 Capacity UtLlization (21 Northern 67.4 66.0 70.6 73.6 77.2 78.7 80.8 Eastern 69.3 61.8 55.6 66.3 74.3 78.2 81.3 Western 80.7 80.7 80.9 79.9 80.1 79.8 81.7 Southern 78.3 80.0 80.4 77.5 78.9 80.7 81.8 Industry ide 75.6 75.- 77.0 76.7 78.6 79.8 81.6 Mini Plants 48.1 75.6 65.4 61.1 62.2 70.1 75.6 Public Sector 61.7 58.2 63.0 66.0 68.8 71.6 75.8 Private Sector 78.8 79.0 79.9 76.8 80.8 81.8 82.9 pre-1982 plants 83.7 87.8 89.1 89.8 90.4 90.9 91.1 post-1982 plants 68.4 66.0 69.5 69.7 73.2 75.3 77.9 ASSUMPTIONS: PROJECT SLIPPAGE.... 6 MONTHS CAPACITY UTILIZATION EXISTING PLANTS 75.0% 75.02 78.0% 80.08 80.08 NEW PLANTS YEAR 1 50.8% YEAR 2 70.02 YEAR 3+ 80.08

Industry Department October 1985 - 56 - ANNEX2-4

INDIA - CEMENT INDUSTRYPROJECT

STRTDIJSEOISTR8IOHU DrINSTfLLO CWITY 19850 1990 (INNILLE TONS) InstalledCapacity on 1.1.1985 Z of Capacityadded trwogh 1.1.l19N Z of Large Rini Other Total Rll IndiaLarge Mini Other Total IIIIndia Total Tota Haan 0.6tS 0.0D 0.E00 0.615 1.50 LU O.0U O.000 0.0U 0.100 HiuchalPradesh 0.760 0.000 0.000 0.760 1.00 0.000 0.003 0.000 0.003 0.89 3Jm.B Kashmir 0.200 0.020 .000 0.220 0.50 0.0L00.033 0.0L0 0.033 1.20 Rajastmn 1.M 0.113 .0U0 4.085 11.50 1.530 0.066 .U0 1.596 8.00 UttarPradesh 2.587 0.061 .000 Z.651 6.20 0.000 0.008 0.0K 0.008 0.00

NortheinRegion 8.564 0.197 .000 9.161 21.50 1.530 0.110 .000 1.610 8.30

Rss 0.200 0.0g. O.W00.200 0.50 0.000 O.00WO.00 0.000 0.00 Bihar 2.59 1.033 .000 2.583 6.10 0.150 0.0LU L.U 0.150 0.80 feiaLap 0.284 0.000 0.000 0.284 0.70 0.G0 LO.D 0.000 0.000 0.00 Orissa 0.966 100D 0.UII 1966 2.30 .00 Q.109 a.000 0.109 0.50 UestBengal 0.60W0.000 0.000 0.600 1.10 1.26 0.000 U 0.260 1.38

EastemRegin 4.6W 0.033 .mO 4.633 10.90 0110 0.109 .00 0.519 2.60

6ujarat 3.371 0.132 .W00 3.503 8.20 1.580 0.718 0.066 2.281 11.50 ladhyaPradesh 7.816 0.099 .000 7.915 11.60 5.714 .059 .000 5.843 29.10 faarashtra 2.219 8.090 0.L0 2.219 5.20 2.175 1.09 .000 2.271 11.50 lesternRegis 13.106 0.231 .000 13.637 32.80 9.4190.916 0.066 10.101 52.10

NadiraPradesh 6.193 0.358 .000 6.543 15.I0 5.066 0.162 0.058 5.578 28.10 Lautaka 3.885 8.053 .000 3.938 9.20 1.800 0.396 .000 1.196 6.00 Km"In 0.120 1.080 1051 0.171 1.10 0.000 0.000U .0 0.000 O.m TfwilNadu 1.225 .007 .000 1.232 9.90 0.4850.033 .000 0.518 L60

SouthernRegion 1.123 0110 0.05115.101 3S.606.351 0.91 .050 7.292 36.70

Nil IndiaTotal 4l.693 0.871 0.05112. 615 100.0017.710 2.026 0.116 19.05210O1

Indiustry Department October 1985 ANNEX 2-5 - 57 - Page -

INDIA - CEMENTIN USTRY PROJECT

GOI Policy for Promoting Growth and Development of the Cement Subsector

1. Over the past several years, the GOI has pursued a number of measures including a deliberate policy of progressive decontrol of cement prices and output, with a view to: (i) stimulating growth of capacity in the Indian cement industry, particularly in light of shortages of cement that were expected to continue for some time; (ii) to improving utilization of existing capacity; (iii) to providing incentives at the producer level for major programs of modernization, rehabilitation and energy conservation; and (iv) ensuring that overall efficiency and productivity in the industrywere continuallyimproved. Many of the policy initiativesin this regard have also pervadedother subsectorsof industry.

2. As shown in the attachedtable, over the past 3-1/2 years since the 1982 cement decontrolorder, GOI's policiesof progressivedecontrol and other measureshave been effectiveand have resultedin: (a) a substantialreduction in the percentageof cement subjectto levy arrangenets; (b) a substantialincrease in levy prices; (c) a substantial increasein the averageretention price to producers(FOB plant);and (d) increasingparity between the averageof levy and non-levyprices and the price of imported cement.

3. With regard to planned Government actions, GOI policy objectives are to (a) enhanceefficiency; (b) remove distortionswith regard to production,distribution and consumptionof cement;and (c) provide adequateincentives through appropriate price structureand levels,for capacityexpansion and plant modernizationin order to developthe subsectorto its full potential. GOI intendsto take the following measuresin order to attain the above objectives: (i) assistanceto the industry to rehabilitate,modernize and balanceobsolete plant and equipment for improving overall capacity utilization, reducing operating costs, mainly through conversion of outdated wet process plant technology to the modern dry process technology, and raising productivity, through appropriate training programs; (ii) with sufficiently enhanced production, a progressive reduction in levy quotas leading eventually to their virtual elimination, and changes in levy price to bring it to par with the market price; (iii) assistance to the industryto developand extend its marketing and distributioncapabilities to prepareitself to activelymarket its productsin a futuremarket-oriented environment. These measuresare expectedto accelerateunder the proposed project for which IBRD financing has been sought. In implementingthese policies,GOI will take into accountthe needs of the remoteand cement-deficitareas. From time to time, GOI will review all the above measures with a view to substantially achievingthe above objectives by the end of the Seventh Plan period. - 58 - ANNEX2-5 Page 2

4. From time to time, GOI and the Bank will, in addition to exchange of views regarding progress in the implementation of the project, also exchange views on achieving the intended policy objectives in the cement subsector.

1982 1982/83 1983/84 1984/85 1985/86 Levy Ar ents 10(l 67%on pze-1982 65%on pre-1982 65% m pre-1982 60Z an pre-1982 (i.e., Z of amip-nt plants, 50z on plants, 45Z on plants, 45%on plants, 4oz on cutput to be sold post-1982 plants post-1982 plants post-1982 plants post-1982 plants as levy cEmnt Basis for calclat- na. lionsed liced limed actusal Ing rlev quota capacty capacity capacLty production Inrtalled capacity OM) (on April 1) 29.3a/ 33.8 37.6 42.6 46.0 (estte) Prodection OMf) 21.1 23.3 27.0 30.2 34.1 (estimte) Levy dispatcies (Ml) 20.8 15.8 16.0 15.8 16.8 (estimate) Nar-levy Dispatcies n.a. 8.2 10.1 13.4 16.5 (estimate) Price:c/ levy- 580 725 857 925 1,040 Open Market nsa. 1,250 1,250 1,280 1,300 Averae retention price to procer M plant) 260 449 462 475 511 (btld) 332 539 590 658 650 landed price of im- port in begs ($/tmn) d/ 65 65 60 r,5 50 (Rs/rton) 585 625 618 660 650 a/ Of *uh nearly 13.0 HWYcaacity aided at E of 1981/82 flnancal years. b/ Not Incling output of udxdplants utaits scope of decontrl order. c/ RsA-retail. _I mIuding uties axi ta,s and etail imgln.

Government of India December 1985 -59 ANNEX 3-1 INDIA - CEtENT INDUSTRYPROJECT

STATEWISE CEMENTPRODUCTION 1983/84 - 1989/90 (IN MILLION TONS)

1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/90 …----ACTUAL…----><------FORECAST------> Haryana 0.600 0.633 0.633 0.633 0.633 0.635 0.635 Himachal Pradesh 0.159 0.418 0.504 2.537 0.566 0.588 0.599 Jammu & Kashmir 0.100 0.145 0.156 0.161 0.166 0.188 0.195 Rajasthan 3.497 3.490 4.008 4.108 4.421 4.727 4.905 Uttar Pradesh 0.993 0.957 1.191 1.354 1.562 1.734 1.907

Total Northern Region 5.348 5.643 6.492 6.794 7.349 7.872 8.242 fssaim 0.168 0.178 0.178 0.178 0.178 0.178 0.178 Bihar 1.546 1.325 1.367 1.475 1.769 1.945 2.063 Meghalaya 0.103 0.096 0.155 0.184 0.203 0.215 0.221 Orissa 0.847 0.858 0.973 1.029 1.050 1.064 1.071 West Bengal 0.324 0.353 0.402 0.426 0.534 0.628 0.658

Total Eastern Region 2.988 2.810 3.074 3.291 3.734 4.030 4.191

Guijarat 2.164 2.244 2.778 3.248 3.945 4.548 4.762 Madhya Pradesh 6.568 6.714 7.276 7.873 9.171 10.262 11.063 Maharashtra 0.925 1.614 1.962 2.440 2.619 2.965 3.438

Total Western Region 9.657 10.572 12.016 13.561 15.735 17.776 19.263

Andhra Pradesh 3.729 4.667 5.470 6.105 7.478 8.582 9.553 Karnataka 1.980 2.485 2.934 3.313 3.568 3.743 3.949 Kerala 0.020 0.142 0.247 0.300 0.334 0.355 0.366 Tamil Nadu 3.278 3.851 3.898 3.921 3.993 4.151 4.276

Total Southern Region 9.007 11.145 12.548 13.639 15.372 16.931 18.145

All India fotal 27.000 30.170 34.131 37.285 42.190 46.508 49.841

Industry Department October 1985 - 60 - ANNEX 3-2

INDIA - CENENTINDUSTRY PROJECT

Non-levy Cement Consumption in Selected States with High Growth Rate Per Annum during 1982-8

Average Annual 1982 1985 Growth Rate - ('000 tons) - (%)

Delhi 301 674 30.8 Punjab 344 618 21.6 Rajasthan 145 388 38.8 Uttar Pradesh 862 1,294 14.5 Assam 38 180 67.9

Bihar 376 664 20.9 Orissa 145 378 37.6 West Bengal 364 1,114 45.2 Gujarat 556 1,597 42.1 Madhya Pradesh 202 640 46.9

Maharashtra 916 2,440 38.6 Andhra Pradesh 730 1,338 22.4 Karnataka 272 718 38.2 Kerala 226 1,144 71.7 Tamil Nadu 701 1,616 32.1

l

Industry Department October 1985 - 61 AN= 3-3

INDIA - CEMENTINDUSTRY PROJECT Statevise Forecast of Demand, Production and Supply/Demand Balance (Million tons)

1984/85 1989/90 Surplus Surplus

Consump- Produc- Deficit Produc- Deficit States tion Demand tion (-) Demand tion (-)

Chandigarh 0.16 0.18 0 -0.18 0.25 0 -0.25 Delhi 1.39 1.49 -1.49 1.87 0 -1.87 Haryana 0.71 0.76 0.63 -0.13 1.54 0.63 -0.91 Himachal Pradesh 0.18 0.20 0.42 +0.22 0.31 0.60 +0.29 Jammu & Kashmir 0.46 0.49 0.15 -0.34 1.08 0.20 -0.88 Punjab 1.07 1.13 -1.13 2.11 0 -2.11 Rajasthan 0.82 0.88 3.49 -2.61 1.19 4.90 +3.71 Uttar Pradesh 2.73 2.92 0.96 -1.96 3.98 1.91 -2.07 North Total 7.51 8.05 5.64 -2.41 12.33 8.24 -4.09

Arunachal 0.02 0.02 -0.02 0.03 0 -0.03 Assam 0.49 0.53 0.18 -0.35 1.01 0.18 -0.83 Bihar 1.51 1.61 1.33 -0.28 1.60 2.06 +0.46 Manipur 0.07 0.08 -0.08 0.10 0 -0.10 Meghalaya 0.12 0.12 0.10 -0.02 0.16 0.22 +0.06 Mizoram 0.03 0.03 -0.03 0.03 0 -0.03 Nagaland 0.07 0.08 -0.08 0.07 0 -0.07 Orissa 0.90 0.96 0.86 -0.10 1.29 1.07 -0.22 Sikkim 0.02 0.02 -0.02 0.02 0 -0.02 Tripura 0.04 0.04 -0.04 0.05 0 -0.05 West Bengal 1.91 2.05 0.35 -1.70 3.33 0.66 -2.67 East Total 5.17 5.54 2.82 -2.72 7.69 4.19 -3.50

Dadra HaveLi 0.03 0.03 0 -0.03 0.15 -0.15 Goa Daman 0.14 0.15 0 -0.15 0.20 -0.20 Gujarat 2.92 3.11 2.24 -0.87 6.00 4.76 -1.24 Madhya Pradesh 1.96 2.10 6.70 -4.60 4.32 11.06 +6.74 Maharashtra 4.38 4.70 1.64 -3.06 7.27 3.44 -3.83 West Total 9.42 10.09 10.57 -0.48 17.94 19.26 +1.32

Andamans 0.01 0.01 0 -0.01 0.01. 0 -o.ol Andhra Pradesh 2.91 3.11 4.67 -1.56 4.7d 9.55 +4.77 Karnataka 1.49 1.59 2.49 -0.90 1.86 3.95 +2.09 Kerala 1.49 1.59 0.14 -1.45 2.88 0.37 -2.51 Laccadives 0.01 0.01 -0.01 0.20 -0.20 Pandicherry 0.05 0.05 -0.05 0.06 -0.06 Tamil Nadu 2.43 2.60 3.85 -1.25 3.57 4.28 +0.71 South Total 8.38 8.96 11.15 +2.19 13.36 18.15 +4.79

GRAND TOTAL 30.47 32.64 30.17 -2.47 51.32 49.84 -1.48

Industry Department October 1985 - 62 - ANNEX3-4

INDIA - CEMENTINDUSTRY PROJECT Price of Levy Cement, 1980-85 a/ (Rupees per ton)

Dec. Dec. Dec. Dec. Dec. June Sep. 1980 1981 1982 1983 1984 1985 1985 Retention Bulk Cement FOB Plant (including Selling Expenses) 222 257 339 339 379 379 379

Packing Costs 62 64 76 90 128 184 143

Excise Duty 65 65 135 205 205 225 225

Other Taxes & Fees 37 75 13 9 9 9 9

All India Equalized Freight 66 76 88 144 144 144 144

FOR Stocklist 452 537 651 787 865 941 900

FOB Plant Price Ind'eA 100 116 153 153 171 171 171

FOR Stockist Price Index 100 118 144 174 191 208 199

Wholesale Consumer Price Index (1980 - 100) 100 109 112 122 131

a/ Exclusive of sales tax and municipal tax.

Industry Department October 1985 ANNEX4-1 - 63- Page 1

INDIA - CEMENT INDUSTRY PROJECT

The Companies - Organization and Ownership

I. The organization of most of the private sector companies is similar. The Board of Directors of the companies, which include nominees of certain state governments and representatives of financial institutions, formulates the policies/objectivesand determines the direction of the company's activities. Except for the nominees from the financial i-stitutions and the state government, others are appointed by the shareholders. The Managing Director is appointed by the shareholders, but his appointment is subject to GOI approval.

2. As for the public sector, CCI is headed by a ten-member Board of Directors composing the Chairman-cum-ManagingDirector, four executives of CCI (Administration,Projects, Operation, and Finance) as well as one representative each from the Ministry of Industry, Development Bank of India (IDBI) and Life Insurance Corporation of India. The latter four are only part time members of the Board. The Chairman and representatives of the Ministry of Industry are appointed by the Government. The Board of Directors sets policies and controls CCI's activities under the framework of CCI's Articles of Association. Individual plants operate as profit centers and are each headed by a Manager of Operations.

3. The stocks of most of the private companies included in the project are traded on the Indian Stock Exchange. The companies generally are owned by three major groups of shareholders: the company promoters, financial/investmentinstitutions and the general public. CCI is wholly owned by GOI. Details of the organization and brief history of each of tie beneficiary companies under Part A of the project are to be found in the Project File, Item 5-1, and summarized in Annex 5-1.

4. Associated Cement Companies (ACC). The company started in 1936, when ten existing companies were merged into a single organization. Today, ACC plays a major role in the cement industry, producing almost one quarter the national output of cement at its 20 plants with an installed capacity of 8.8 million tons of cement. With the expertise gained in the operations of its various factories, ACC has undertaken design and manufacture of plants to meet its own expansion needs, and for other producers in India and abroad. The company has highly competent and experienced personnel in the fields of geology, planning and engineering, computer technology, research and development; it also has highly trained teams of civil engineers, erection and commissioning staff. The company has the ability to implement projects from initial geological prospecting to a turn-key erection, comnissioning and start up. ACC's paid-in capital on July 31, 1984 was Rs 332.5 million, consisting of 3.3 million shares of Rs 100 par value. The Company's shares are actively traded; individual shareholders number over 61,000 and own over 60% of the shares; Government bodies and Statutory Corporations own nearly 37% of the equity shares. The company also has controlling interest in its subsidiary, ACC-Babcock Ltd. and ANNEX 4-1 - 64 Page 2

Associated Tyre Machinery Company, Ltd. (ATMC). ACC-Babcock manufacture boilers, cement machinery and foundry products, while ATMC produces tire manufacturing machinery and foundry products, brake assemblies and other automotive-relatedfabrications.

5. Birla Jute and Industries Ltd. The company was incorporated in August 1919, under the Indian Companies Act of 1913 and started business as 'The Birla Jute Manufacturing Company Ltd". The name of the company was changed to Birla Jute and Industries Ltd" irt 1983. From initially processing jute, the company has diversified over the years to include the manufacturing of cement, polyester and viscose blended yarn, calcium carbide, oxygen and acetylene gases and steel castings. The company's first cement plant at Satna (Madhya Pradesh) went into production in 1959 with an initial capacity of 750 tpd which was later expanded to 1,750 tpd. The company has also installed another plant of 2,500 tpd adjacent to the existing plant, which went into coamercial production in 1983. The company is in the process of converting its plant at Chittorgarh (Rajasthan)from 1,200 tpd to 2,225 tpd, which will go into operation in June 1986. The company also has a slag grinding plant at Durgapur (West Bengal) with a grinding capacity of 600,000 tpa. The present cement manufacturing capacity of the company is 2.7 million tons. The company's paid in share capital on March 31, 1985 amounted to Rs 87 million, consisting of 8.7 million ordinary shares of Rs 10 par value. The major shareholders of the company are the Public Financial/DevelopmentInstitutions (29%), companies registered under the Companies Act (35%), and the general public (32%). Tle company has 100Z shareholdings in its subsidiaries, India Linoleums, Assan Jute supply Co. Ltd and Bharat Overseas Corporation.

6. The India Cements Limited (ICL). India Cements was incorporated as a public limited company in 1946, with is registered office at Madras. The company set up its first cement plant in 1949 at Sankarnagar, Tamil Nadu, with an installed capacity of 0.12 million TPY. India Cements operates two wet process cement plants with a total capacity of 1.4 million TPY. One is located at Sankarnagar and the other at Sankari, both In Tami' Nadu in the Southern region. The Sankarnagar plant, which first started production in 1949, consists of five kilns. The Sankari plant, which first started production in 1964, has a capacity of 0.6 million to TPY and consists of three kilns. In addition to the two cement plants, the company operates a modern malleable cast iron foundry, with an installed capacity of 5,280 tonnes a year.

7. India Cements' paid-in share capital on March 31, 1983 amounted to Rs 52.35 million, consisting of 9.8 million ordinary shares of Rs 5 par value each and 33,500 preference shares of Rs 100 par value each. The major shareholders of the company are the financial institutions and the general public, with 48.5% and 47.3% of the shareholdings, respectively. The company is adequately staffed with Senior Management of high caliber. The technical personnel at the plant site are also of high caliber and knowledgeable in the wet process technology. However, once the Sankarnagar plant is converted, plant personnel need to be trained in the dry process technology. India Cements proposes training most personnel locally. ANNEX 4-1 - 65 - Page 3

8. Cement Corporation of India (CCI). The CCI was founded in 1965 under the companies Act of 1956 and it wholly owned by the Government of India (GOI). Apart from a few small to medium-sized state-owned cement companies it is the only public sector company in the industry and operates nation-wide. In 1970, fCI started up its first cement plant of about 200,000 tpy capacity (wet process) in Mandhar, Madya Pradesh. At present CCI operates nine plants with a total capacity of 2.7 million tpy, representing about 6Z of total cement production capacity in India. Besides the proposed conversion project at the Mandhar site. CCI has under construction, a greenfield cement plant of I million tpy capability at Tandur and is undertaking expansion/conversionsat three other plants (Madhukunda, Neemuch and Yerraguntla) from total expansion in installed capacity of 3.9 million to tpy. In addition to manufacturing cement, CCI provides services such as training, research and development, as well as technical assistance in raw material exploration and operations, not only for its own operations, but also for other companies in the cement industry.

9. CCI operates under the control of the Ministry of Industry and functions according to its own Articles of Association of January 1965. For major investments, CCI prepares feasibility studies and obtains approval from: (i) the Ministry of Industry (Department of Industrial Development), (ii) the Bureau of Public Enterprises; (iii) the Planning Commission; (iv) the Department of Economic Affairs in the Ministry of Finance; and (v) the Public Investment Board. After their concurrence, the Cabinet gives final approval to the investment projects submitted to it. Annual investment programs and operating budgets are prepared by CCI management, approved by the Ministries of Industry and Finance and executed under CCI's own responsibility. Only major changes or substantial deviations from the budget have to be cleared with these Ministries. While these procedures appear involved, CCI enjoys a large degree of freedom in proposing investments, setting personnel and operating policies and carrying out its operations.

10. (KCP). The KCP Limited is a large industrial house in South India, operating a 6,500 TPD sugar plant at Vuyyuru, Andhra Pradesh - one of the largest plants in Asia, a heavy machinery workshop at Tiruvottiyur in Madras, manufacturing and supplying compete sugar plants and cement plants on a turnkey basis and general engineering items, and a cement plant of 750 TPD capacity at Macherla in Guntur District, Andhra Pradesh. The KCP Limited commenced its operations in 1943 and has built up a good reputation for the quality of its products in India and abroad. It has built up considerable financial strength and has registered a steady increase in operations and profits over the years. Its turnover for the year 1982/83 was about Rs 673 million with a profit of Rs 89 million before depreciation and tax.

11. CKA. The Cement Manufacturers' Association was started in 1960, with the primary objective of providing a forum through which the cement industry could make known to the Government its views on policy and regulatory matters affecting the industry's performance and prospects. ANNEX 4-1 - 66- Page 4

Over the past 25 years, the CMA has been an effective industry spokesman that has presented alternatives, carried out independent analyses of Government policy and been successful ir lobbying for a number of changes. CMA has also provided a forum for informal price stabilization by providing suggested price ceilings as a means of dampening public criticism of perceived or actual industry excesses (i.e., price gouging, unfair trade practices, etc.). Membership in the CMA has been limited to cement plant owners with rated capacities in excess of 100,000 TPY (approximately 300 TPD); the newly emerging mini cement plant owner/operators have only been admitted as Associate Members. At the start of FY85/86, there were 47 registered members, representing nearly all manufacturers with currently operating cement plants, and 15 associate members, of whom 7 were operating mini zement plants and the others had large-scale projects under construction. CMA's administrative costs are supported by annual membership assessments.

Industry Department October 1985 -67 - ANNEX 4-2 Page 1

INDIA - CEMENTINDUSTRY PROJECT

ACC Madukkarai Project Description

1. Project SuMMary. The project consists of converting the Madukkarai plant, located in Coimbatore district of Tamil Nadu from wet to semi-wet process. The five present kilns have a clinker capacity of 358,000 TPY corresponding to 380,000 TPY of OPC cement. In the conversion the five kilns will be replaced with a new 3-stage preheater precalciner kiln with a rated capacity of 1,500 TPD corresponding to 520,000 TPY of OPC. The five old kilns consume 0.44 tons of coal per ton of clinker compared to 0.26 tons for the proposed new kiln (1,656 kcal/kg clinker versus 1,040 kcal/kg clinker, a savings of 37%). At the lower coal consumption a higher cement strength will be attained and because of the proposed high efficiency dust collection equipment the specific raw material consumption will be reduced by 6%. Specific electric energy consumption will increase from an average of 117 kWh/ton of cement to about 120 kWh/ton cement.

2. Options Considered. The existing kilns, installed in 1934, 1937, 1943, 1950 and 1966, are in good operating condition, however, the high fuel consumption causes the plant to operate at a loss. The limestone is high in silica and requires upgrading by froth-flotation. The high moisture content resulting from flotation makes the semi-wet process the most efficient process option. The novel approach recommended by ACC's foreign consultants utilizes wet grinding of raw materials (carried out in the existing rawmills), reduction of kiln feed moisture from 35% H20 to 17% H2 0 by the use of vacuum filters, and drying of the filtercake in a crusher/drier with the exhaust gases from the 3-stage preheater. The kiln will receive dried kiln feed and function as a conventional preheater precalciner kiln except for a slightly lower fuel efficiency due to the drying requirements of the crusher/dryer. The 1,500 TPD preheater precalciner kiln is the most favorable option since it requires no new mills to be installed and none of the mills to be converted. The froth-flotation plant (installed in 1968) is in good condition and will be expanded by addition of two new cells as part of the proposed project. The existing cement grinding mills are capable of producing 500,000 TPY at about 70% operating time without any modification.

3. Equipment Requirements. Review of the various plant departments identified the following equipment groups:

(a) Equipment To Be Modified - Craneway for new clinker-handling system.

(b) Equipment To Be Abandoned - Five wet process kilns, clinker coolers, clinker handling, coal mills. ANNEX 4-2 - 68 - Page 2

(c) New Equipment

(i) Flotation Plant - 2 additional flotation cells.

(ii) One new vacuum filter plant with capacity of 2,400 TPD of kiln feed.

(iii) Kiln Department - One 1,500 TPD 3-stage p_eheater kiln with integral flash drying, clinker cooler, clinker dust collector, clinker handling system, and coal mill. (iv) Laboratory - Off-line X-ray and digital computer for cement compound calculation.

(v) Power - 6 MW diesel standby power.

4. Role of the Bank in Technical Appraisal. Diring technical discussions at the plant several suggestions were made to improve the project which were accepted in principle by management. They were:

(a) Install a trommel screen at Walayar quarry to capture some 72,000 tons of high grade limestone fines which are currently wasted.

Cb) Change process control from total carbonate to lime saturation factor by use of off-line X-ray.

cc) Replace the proposed multiclone clinker dust collector with higher efficiency dust collection equipment.

(d) Provide 'clean rooms- to house central control room and off-line X-ray.

The project is well planned with the proposed new equipment well integrated with the existing plant and it permits the existing plant to operate without interference during construction. Downtime will be held to a minimum during changeover to the new kiln, probably less than 60 calendar days.

5. Raw Materials. There are two major limestone quarries described below.

(a) Walayar Deposit. Mining lease of 161 acres. The deposit occurs on the flank of a hill and extends into contiguous flat land with no overburden. Foreign inclusions of clay and intrusions of feldspars require selective mining and screening. Recent geologic investigation has proven about 19,000,000 tons of limestone. The haul to the plant is 19 km by truck over a well improved asphalt road. The quarry produces 1,200 TPD in 3-shifts, 7 days per week. An hydraulic rock breaker will be acquired to break the numerous "dobies" into sizes the crushing plant can handle. The quarry production rate will be increased to match the crushing plant capacity, 1,400 TPD. - 69 - ANNEX 4-2 Page 3

(b) Madukkarai Deposit. This deposlt is long and narrow. Quarry trucks haul stone 5 kn to the plant crushing plant. The two 4J" jaw crushers with a cLosed circuit cone secondary crusher have a capacity of over 1,200 TPD of 3/4" size. Production is currently 800 TPD and it will be expanded to 1,200 TPD in the near future. The long narrow deposit requires multiple faces for efficient operation. Sideburden is a problem and limits the depth to which quarrying can be performed. As at Walayar quarry, intrusives control the boundaries (limits) of high grade stone. Two horizons of stone occur (42Z to 44% and 44% to 46% CaO), which are quarried and stored separately for proportioning at the plant. The chemical composition is ideal for preheater operation. Total estimated reserves in the Madukkarai quarry are 68,000,000 tons with a sideburden ratio averaging 0.5 tons per ton of limestone.

(c) Total Reserves. Total reserves are estimated to be:

Walayar 19,000,000 tons Madukkarai 68,000,000 tons Total 87,000,000 tons corresponding to over 100 years' life.

6. Other Materials

(a) Gypsum. The source is Fertilizers and Chemicals Travancore Ltd., Cochin. This by-product gypsum is hauled by road 240 km.

(b) Hematite. Annual consumption 6000 tons.

(c) Pozzolan. Annual consumption 46,000 tons.

(-) Coal. Proportion of the three sources varies:

Singareni 1,200 km Rail Western 1,400 km Rail Eastern 2,200 km Rail Neyvelli Lignite 500 km Rail

7. Power. The present supply of 9,500 kVA at 22 kV are furnished by Tamil Nadu Electricity Board. Percentage of downtime due to power outage has been: 1981 0.2%, 1982 1.75%, 1983 0.5%. 18,500 kVA will be required at project completion and a new 110 kV substation will be built. ACC plans to increase the capacity of diesel generation, which presently is 3.14 MW.

8. Rail. Rail facilities are adequate (broad gauge).

9. Road. The plant is well connected to the road net and is only about 40 km from Coimbatore. - 70- ANNEX4-2 Page 4

10. Water. Present use rate is 8 lakh gallons of which 2 lakh gallons are being recirculated. Source is drilled wells which are sensitive to the monsoons.

11. Transport Analysis. Insufficient data to complete. Please show for all input materials and for cement name of material, location of source, distance from source to plant, mode of transportation (rail or truck). Tabulation as showed for Shahabad.

12. Environmental. The plant design except for the proposed multiclone dust collector for the clinker cooler vent will be adequate to meet proposed Indian standards for particulate. No solid waste or liquid effluent problems exist.

13. Project Management. The overall responsibility for project management will rest with the projects division of ACC. A project coordinator at Lhe projects division and a project manager at the project site have already been nominated for the implementationof the project. The project manager at the site will have under him a group of managers and engineers drawn from various disciplines like civil engineering, mechanical engineering, electrical engineering, construction planning and accountants who will form a composite team reporting directly to the head of the projects division. ACC's central erection team will be responsible for installation. The detailed design for the project will be carried out by the projects division assisted tv operations division, Madukkarai works and by the consultant. The procurement will be done by the projects division in close coordination with the materials, management division. A progress and inspection unit will be set up to inspect all major and critical machinery prior to dispatch and to monitor progress at the supplier's works.

14. Consultants. Rugby Cement Consultants Ltd., UK, will be the overall technical collaborators for the project and will be responsible for technical aspects of the process.

15. Implementation. The attached implementation chart shows award of the major machinery contract October 1985. ACC has placed this contract with ABL, a wholly owned machinery manufacturing subsidiary. As ABL provides the technical design data the specifications for the thirteen :CB packages will be prepared. Civil works will start August 1986 and commissioning will take place March 1988, 29 months after placement of the major machinery contract.

16. Training and Commissioning. ACC has 17 operating cement plants. Key personnel that will be assigned are rotated among the various plants. The Central Training Department in Bombay will provide technical training for various categories of technical personnel. Junior supervisors and artisans are trained at Kymore cement works. La Farge group of France will provide, under a current agreement, training of personnel on-site for the new plant as well as at La Farge plants in France. Supervisors and ANNEX 4-2 - 71- Page 5 artisans will be sent to various electrical and machinery manufacturers in India and abroad for training. Commissioning will be performed by a team of ACC personnel and start-up personnel supplied by vendors. The plant employs 1,487 people and ACC plans to reduce the number of personnel by natural attrition.

Industry Department October 1985 rt gL rDrt

I1,g P^EIOCT: DA AUKRAt

226S6159@£I2flH£6~ 1619 IMPLEMNNTATIONSCdEDULE

1965 2966 2967 1966 gag~~~~~~~~~~~~~~~~~~181990 S-OIND J UHAl"HJ JA SON D J P4A NJ J A 0N D J F NA MJ J A S OJ N A NJ J A S 0UDJ F 1 11'252 3 4 " 5 7 1'8 9 10 11 12 13 1" is 1' 11IIs 19 20 21 22 23 26 21 26 29 30131'3233 35 36 3 19 19 60 41 62 43 66 65 66 6 61 6C9so50 5 2 53 54

Prop. & meiling of IdI eocumoltI

BlidRspaipoee Time

Bid avalu.rlon 6 1/

Civil Voris

Delivery of Equipuest

Coini2uobins

1/ Main equipment ordered by the company from its own subsidiary

rt - 73 - ANNEX4-3 Page 1

INDIA - CEMENTINDUSTRY PROJECT

ACC Shahabad Project Description

1. Project Summary. The project consists of converting the present Shahabad plant, located in the Gulbarga district of Karnataka State from wet to dry process. The present rated capacity of the four wet kilns is 1,440 TPD of clinker corresponding to 500,000 TPY of cement. One 2,400 TPD preheater precalciner kiln will replace the old kilns. The proposed plant will have a clinker capacity of 3,400 TPD corresponding to 830,000 TPY of cement. The present wet kilns operate at a fuel consumptien of 1,650 kcal/kg of clinker. The proposed new kiln will operate at 850 kcal/kg. This corresponds to a reduction from 0.442 to 0.23 tons of coal per ton of clinker (equivalent to a savings of 48Z). Power coLsumption is presently close to 140 kWh/ton cement and the converted plant is expected to operate at 120 kWh/ton of cement.

2. Options Considered. Age and poor mechanical condition have rendered the existing kilns obsolete and the main considerations of this project were location, layout and capacity of the new facilities. As a standard procedure the existing infrastructure, the market and limestone reserves were carefully analyzed before project capacity was determined. In this case the project layout permits a future doubling of capacity. A large percentage of the existing equipment was found unsuitable for integrationwith modern equipment and for that reason the converted plant will contain new equipment to a high degree. The new facilities are sufficiently separate from the existing equipment that construction can be undertaken with a minimum interruption of the existing equipment and permit operations to continue uninterrupted.

3. Equipment Requirements. Analysis of the process areas identified the following groups of equipment:

(a) Equipment to Be Modified

(i) modification of the gantry to accept stone from a new aerial tramway;

(ii) upgrading of existing finish mill department.

(b) Equipment To Be Abandoned

(i) existing primary and secondary crushing system;

(ii) existing wet process proportioning, raw milling, slurry handling, blending and storage, wet kiln, clinker cooler and clinker handling; .t i (iii) existingcoal-fired 10 MW power plant. ANNEX 4-3 -74 - Page 2

(c) New Equipment

(i) Quarry. New 600 TPH impact crusher; 5 km, double line, aerial tramway, automatic discharge into the existing gantry (storage).

(ii) Raw Material Storage. Blending/storageretrieval systems for both limestone and coal.

(iii) Raw Mill Department. A new vertical roller mill of 250 TPH capacity.

(iv) Kiln Feed Department. Homogenization and storage facilities.

(v) Kiln Department. One 2,400 TPD 4-stage prelxeaterkiln, clinker cooler and dust collector, coal mill and coal mill dust collector.

(vi) Cement Storage and Packing. One 12-spout rotary packer with dust collector.

(vii) Electrical Power Supply and Distribution

(viii) Process Control. 1 X-ray analyzer with 'clean room".

4. Role of the Bank in Technical Appraisal. During technical discussions, Bank technical staff recommended replacement of the proposed multiclone clinker dust collector in order to meet proposed Indian emission standards and persuaded ACC to provide 'clean room' conditions for the central control room and X-ray room as part of the project.

5. Raw Materials. The present quarry utilizes a small narrow gauge railway to haul crushed limestone 4.5 km to the plant. Detailed study indicated that a new ropeway and a new impact crusher would he the most favorable alternative. The quarry is extensive with the working face 2 km long. Overburden is 1 to 3 meters in depth, no water problems and a relatively flat, smooth floor provides excellent working conditions. The present deposit hae 17 years' reserve at the proposed new rate. Acquisition of contiguous reserves, estimated to contain 42 million tons of limestone, is in progress. The chemical composition of the limestone is favorable for preheater operation.

6. Other Materials

(a) Gypsum. A blend of natural and synthetic gypsum is used, shipped by rail for a distance of 538-1,868 km. Current consumption is about 28,000 TPY.

(b) Red Shale. 124,000 TPY (low-grade limestone from quarry). 75 - ~~~~~ANNEX4-3 - 75 Page 3

(c) Hematite. 12,000 TPY purchased.

(d) Pozzolan. 140,000 TPY.

(e) Coal. 220,000 TPY. Singareni, 500 km rail and truck; Western Coal Field, 850 km rail and truck.

7. Electric Power. Power is received from Karnataka State Electricity Board (KSEB) at 132,000 volts. The present contract is for 12 MVA and an application for 18 MVA will be filed for the new plant. Power cuts have been severe; during the last two years they have varied from 28% to 80%. The plant contains a thermal captive power plant, which because of age and the poor quality coal is only able to produce 5 MVA. The company plans to install two DG sets each of 3.2 MVA, which would bring the combined captive power generation capacity to 11.4 MVA, corresponding to 63Z of the peak requirement.

8. Rail. The plant is on a main broad gauge line with direct service to Hyderabad and Bombay. More than 80% of cement is shipped by rail.

9. Road. The plant is well connected to the road network in Karnataka and enjoys truck service for input materials and 20% of cement shipments. The nearest town is Gulbarga, some 30 km northwest.

10. Water. The source of water is the Kagna River which supplies the plant and colony by a 3 km pipeline. Supply has been adequate.

11. Transport Analysis. Following is a summary of the transport requirement for the plant:

Volume ('000 tons) Distance (km) Rail Road Input Limestone 4.5 684,000 Red Shale 4.5 124,000 Hematite 200 12,000 Gypsum 538 to 1,868 28,000 Pozzolan Highly variable 70,000 Coal: Singareni 500 100,000 30,000 Western Coal Field 850 70,000 20,000

Output Cement - 660,000 170,000

12. Environmental. The plant design will incorporate particulate emission discharge levels appropriate to meet the proposed Indian emission standards of 250 mg/Nm3, which will be a great improvement over present operation. No solid waste or liquid effluent problems were reported. - 76 - ANNEX 4-3 Page 4

13. Project Management. The overall responsibilitywill rest with the projects division of ACC. A project coordinator at the projects division and a project manager at the project site have already been nominated for the implementationof the project. The project manager at the site will have under him a team of engineers and accountants with experience in civil engineering, mechanical engineering,electrical engineering, construction planning and construction accounting. ACC's Central Erection Team will supervise the contractors doing the civil works. The detailed design for the proj!ct will be done by the Consultants M/s. Holtec Engineers under the overall supervision of an ACC design committee composed from representativesof MB/s.Holtec Engineers, operation. division, Shahabad works and projects division. Procurement will be done by M/s. Holtec Engineers in cooperation with the projects division and materials management dLvision. A progress and inspection group will be set up to inspect all major and critical machinery prior to shipmient. Cost control will be the responsibilityof senior accounting managers at the ACC office and at the site. An in-house computer program will monitor and process all project costs.

14. Implementation. The attached implementationschedule shows award of the major machinery contract by April 1986. ACC will place this order with ABL, its wholly owned machinery manufacturing company, located in Shahabad. As ABL provides the technical design data the specifications for the eleven ICB packages will be prepared. Civil works will commence November 1986 and commissioning will take place August 1988, 28 months after placement of the major machinery contract.

15. Training and Commissioning. ACC has 17 operating cement plants. Key personnel that will be assigned are rotated among the various plants. The Central Training Department in Bombay will provide technical training for various categories of technical personnel. Junior supervisors and artisans are trained at Kymore cement works. The La Farge group of France will provide, under a current agreement, training of personnel on-site for the new plant as well as La Farge plant in France. Supervisors and artisans will be sent to various electrical and machinery manufacturers in India for training. Commissioning will be performed by a team of ACC personnel and start-up personnel supplied by vendors. The personnel in the Shahabad Plant number 1915, and ACC plans to reduce the number through normal attrition.

Industry Departmt-nt October 1985 Pao,RCT S/#'A#A8AD

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INDIA - CEMENT INDUSTRY PROJECT

Satna Project Description

1. The project comprises the conversion of Birla's Satna plant, located at Satna city in Madhya Pradesh, from wet process operation to dry process operation. The three existing wet process kilns with a combined capacity of 1,750 tpd will be replaced by a single new preheater, precal-iner kiln with a rated capacity of 2,250 tpd. As a result the rated capacity of the Satna plant will increase by 29%, from 581,000 tpy to 750,000 tpy. Birla intends to file a letter of intent with the Directorate General Technical Department (DGTD) for a license to increase the capacity to 750,000 tpy. A 2-year-old production unit, Birla Virkas, located adjacent to the Satna production unit, has a rated capacity of 800,000 tpy, and with the new project the total capacity would become 1,380,000. The contemplated incremental increase of 170,000 tpy would correspond to 12.3% of the present total capacity.

2. Options Considered. The Birla engineering department considered the following options:

(a) modification of the existing kilns to dry process operation; and

(b) replacement of the existing wet process kilns with a new efficient dry process kiln.

Operation (a), modification of the existing kilns, was rejected for the following reasons:

Ci) it would require stoppage of each of the kilns for possibly nine months during modification with resulting loss of production; (ii) the cost of modification and updating to modern controls would become as high or higher than installing a new kiln; and

(iii) the resulting plant would still be based on equipment 25 years old with the inherent high maintenance costs and r4k of breakdown.

Consequently, option (b), the installation of a new kiln, was decided on. The 2,250 tpd capacity of the new kiln is the maximum capacity which can be accomodated by the existing plant and quarry infrastructure. Two sites were available as locations for the new production line - one adjacent to the 2-year-old Vikas unit of the Satna plant (comprising a 2-year-old 800,000 tpy preheater, precalciner plant) and the other adjacent to the original old Satna plant. The latter was chosen and this project description is based on that location. The new kiln will operate at 830 kcal/kg clinker compared to 1,535 kcal/kg clinker in the present kilns. Fuel savings will be on the order of 46%. ANNEX4-4 79 Page 2

3. Equipment Requirements. Analyses of material flows in each of the process areas determined which equipment should be abandoned, and which to be modified and identified new equipment to be acquired as follows:

(a) Equipment To Be Modified

(i) One of the existing wet rawmills will be converted to a cement mill, which in conjunction with the existing four cement mills will allow grinding of the rated clinker production into cement by operating only 18 hours per day.

(ii) The existing covered clinker storage facility will be upgraded by replacing the existing three overhead travelling cranes by new cranes.

(iii) The existing three coal mills will be provided with efficient electrostatic dust collectors.

(b) Equipment to be Abandoned

(i) The existing three wet process kilns with dust collectors and clinker coolers and all the associated storage, handling and feeding equipment for wet kiln feed.

(ii) All of the existing wet raw mills except the one being converted to a cement mill.

(iii) Existing cement packing machines.

(c) New Equipment

gi) quarry equipment to accomodate the increased demand for raw materials.

(ii) dry raw mill (most likely ball mill type with associated blending, storage and handling equipment for dry kiln feed).

(iii) 2,250 tpd preheater, precalciner kiln, grate clinker cooler, kiln feeder and all associated efficient dust collection equipment.

(iv) One coal mill for kiln precalcinerwith associated coal feeders and efficient dust collection equipment.

(v) New electronic cement packing machines to be installed in the existing pack house.

(vi) Three 4 KW thermal power units (used) presently being installed in order to boost the captive power generation of the combined Satna-Vikas complex to 22 KW. ANNEX 4-4 - 80 - Page 3

4. Role of Bank in Technical Appraisal. The project is well conceived and well prepared and no significant suggestions for change or modifications were required. The one area where additional assistance seemed desirable was in the area of ICB procurement where the mission recommended that consultants with the proper experience be retained for drafting of bid documents and for bid evaluation.

5. Raw Materials and Other Input Materials

(a) Limestone: Birla leases from the Madhya Pradesh government 10 square kilometers of limestone deposits located 5 km from the plant. The lease period is 20 years and the present lease must be reviewed in 1995. Crushing will be done in the quarry in the two existing crushers and the crushed stone is transported to the plant by an aerial ropeway. Up to 3 meters of overburden is found in some areas of the deposit and the deposit consists of a 12-13 meter layer of high quality limestone with a gentle dip of only 5°, which makes it easy to mine. A major geological survey carried out in 1979 by professional geologist on an area of 1.15 square kilometers comprising 36 drill holes proved reserves of 27 million tons within the 1.15 sq km surveyed. The yearly consumption of limestone for the new project and the Vikas unit combined will be 2,300,000 tpy compared to an estimated 60 million tons of reserves remaining or 26 years. The chemical composition of the limestone is well-suited for precalciner operation as proven after two years of operation of the precalciner kiln in the Vikas unit.

C) Iron Ore and Laterite: Estimated incremental yearly requirement 4,400 tpy. Birla has long-term leases on laterite deposits 200 km from Satna and purchases iron ore from various suppliers approximately 100 km from the plant.

(c) Gypsum: purchased from gypsum mines in Rajastan owned and operated by government agencies. Distance 1,100 km.

(d) Pozzolan: Birla contracts with local operators who manufacture synthetic pozzolan from clay and coal ash provided by Birla. Distance from the p7aat: 1-2 km.

(e) Coal: Supply allocated by the Coal Linkage Committee from Western Coal Fields. Distance to plant 200-300 km. Price controlled by India Coal Limited, a Government-ownedcompany.

Infrastructure:

(a) Power: Contract with Madhya Pradesh Electricity Board (MPEB) for 8.5 MW, and captive power generation capacity of 7.5 MW. The present demand is 14 MW and the conversion will result in only a minor increase in power demand. Birla is in the process of installing 8 MW of diesel generator capacity and 12 MW of thermal power generating capacity. The Vikas plant will share in the use of lower cost captive power. -81 ANNEX 4-4 Page 4

(b) Water: With the convetrsionto dry process the water consumption will be reduced by 30D. The source of water is the Santa River 5 km from the plant.

(c) Rail: The plant has broad gauge spur to the S*tna railroad station with excellent facilities.

(d) Road. The plant has an excellent 2 km long road to Nr,tional Highway No. 7.

Transport Analysis

Distance Volume in '000 tons (km) Rail Truck Input Limestone 5 (Ropeway)1,200 Laterite 20 25.4 Coal 250 151 Pozzolan 5 79.3 Gypsum 35.5 Iron Ore 100 20

Output Cement 525 225

6. Environmental Matters. The project is designed for compliance with the recently proposed but not yet enacted Indian standards for pollution control. The plant will have no problems with liquid emissions or solid waste disposal.

7. ProjectManagement. Birla has been implementing two cement plant projects during the last four years. The first project, Birla Vikas, was commissioned in 1983 and the next project will be commissioned in early 1986. The company has a highly competent staff, and will manage and implement this project with its own people. A consultant will be retained to assist in preparation of bid specification, and outside contractors will be utilized for civil works and erection and installation.

8. Implementation. The attached implementation chart shows award of the major machinery contracts by December 1986 and start of civil works by July 1986. Commissioning will take place in December '.988,24 months after placement of the major machinery orders.

9. Trainin and Commissioning. Birla is training all itq personnel in the Birla Vikas plant, which comprises a modern 2,500 tpd precalciner kiln. In addition the company will make use of start-up specialists provided by the equipment suppliers. The present plant employs 800 people and the company plans to reduce this number by natural attrition.

Industry Department October 1985 * ~~~-82 - ANNEX 4-4

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INDIA - CEMENT INDUSTRY PROJECT

CCI Project Description

1. Project Summary. The project consists of converting the present Mandhar plant located in the Raipur district, Madhya Pradesh, from wet to dry process operation. The present plant capacity is 600 TPD of clinker corresponding to 380,000 TPY of slag cement. The converted plant will have a rated clinker capacity of 1,200 TPD and will produce 700,000 TPY of cement consisting of 400,000 TPY of slag cement and 300,000 TPY of pozzolan cement. The project will improve fuel efficiency substantially. The present kiln operates at a fuel efficiency of 1,575 kcal/kg clinker or 0.366 tons of coal per ton of clinker, while the proposed new preheater, precalciner kiln will operate an 850 kcal/kg clinker corresponding to a coal consumption of 0.20 ton of coal per ton clinker. Because of the addition of 50Z slag in slag cement the corresponding fuel consumption per ton of cement wilL be 709 kcal/kg cement and 484 kcal/kg cement, respectively, for the present and the converted plant corresponding to a fuel saving of 32%. The specific power consumption will increase from 96 kWh/ton to 107 kWh/ton of cement.

2. Options Considered. Conversion from wet to dry process can be done by either modifying the existing kiln or by replacing the old kiln with a new one. The capital cost of modifying a kiln is lower than the cost of installing a new one, however, the benefits derived from a new kiln, such as higher fuel efficiency and production and longer equipment life will in most cases make the installation of a new kiln the best option. In the early phase of this project eight different options were analyzed, four of which involved semi-wet operation and four dry process. Seven of the options were based on utilizing the existing kiln after some modification, and the eighth option comprised the installation of a new preheater precalciner kiln.

3. Options 1 to 7 offered limited flexibility bcause of equipment configuration,particularly in respect of capacity. Option 8 provided flexibility in respect of capacity and the optimum capacity of the new kiln was determined by considering factors such as: cement market, raw materials reserves and plant infrastructure. After careful analysis CCI and the consultants concluded that mainly because of plant infrastructure considerations a kiln production of 1,200 TPD was optimum. A kiln with 1,500 TPD rated capacity will be installed in order to assure sustained production of 1,275 TPD (85% utilization). At that capacity the raw material deposit will last 45 years. The advantages of this option are: L.o downtime and loss of production of the existing equipment during construction, and low future maintenance and operations costs because of entirely new raw mill and kiln departments.

4. E4uipment Requirements. Analysis of material flows in the various process areas identified the following approach in respect of equipment: ANNEX 4-5 - 84 - Page 2

(a) Equipment to be Modified: the present raw mills to be converted to open circuit cement mills

(b) Equipment to be Abandoned: existing wet process kiln with slurry storage, handling and feeding equipment, clinker cooler and coal crushing and grinding equipment

(c) New Equipment

(i) Quarry: Loaders, drills, compressors, and dumptrucks

(ii) Raw Material Storage: Linear preblending stockpile

(iii) Raw Mill Department: 1 x 3,200 HP dry ball mill, 120 TPH

(iv) Kiln Feed Department: 2 homogenizing and storage silos

(v) Kiln Departuent: 1 x 1,500 TPD 4-stage preheater kiln with optimum precalciniag (according to coal quality), clinker cooler, coal mill, dust collection equipment.

(vi) Cement Storage & Packing Plant: Cement storage silos and a packing machine

(vii) Electrical Infrastructure: Transformer, motor control centers and new powerlines to quarry

5. Role of Bank in Technical Appraisal. During discussions of the technical features the mission suggested various modifications which could reduce power consumption. The mission also convinced CCI to utilize efficient dust collection equipment for dedusting of the clinker cooler rather than utilizing multiclones which would have prevented compliance with the new Indian specifications for pollution control. In general, the project concept is sound and the layout is sensible. The modified plant will be relatively easy to operate and maintain.

6. Raw Materials. The raw material deposit at Pathri, 11 km from the plant, provides both high-grade and low-grade limestones, and only 1.OZ of additives (iron ore) must be added in order to obtain proper mix. The chemical composition of the limestone is favorable for dry process operation. Chemical analysis of 361 composite samples prepared from core samples showed potassium, sodium and chloride contents to be well below the levels critical to preheater operation. The thickness of the limestone varies from 30 m to 35 m and it is overlaid by up to 7 m of overburden. An exploration program based on a 150 m grid patt(Ernwas performed on the 365 acres leased and 1,223 core samples were collected. The measured reserves of limestone add up to 29 million toas of raw materials, corresponding to 45 years of operation at the proposed plant capacity. ANNEX4-5 - 85 - Page 3

7. Other Materials

(a) Slag: CCI has contracted for 200,000 TPY of slag; from the Bhilar steel plant, located 40 km from Mandhar by road. Transportation by truck.

(b) Gypsum: 34,000 TPY arrives by rail from Simka Chalam, a distance of 560 km.

(c) Iron Ore: from Sihora purchased 475 km, rail, 8,000 TPY.

(d) Pozzolan: 41,000 TPY arrives by truck from Raipur, only 16 km from the plant.

(e) Coal: Coal is transported 200 km by rail in open wagons from the Banki Coal Mine, Central India Coalfields (CIC). CIC suffers from production problems, and although the plant has not run ou: of coal recently the plant is seldom able to inventory more than 17 days of coal consumption. The present coal linkage is for 72,000 TPY per year, and the application for the new plant calls for 80,000 tons per year. The new linkage will be confirmed as part of the PIB license, which has been applied for.

Infrastructure

B. Power. The plant receives power from Madya Pradesh State Electricity Board (MPSEB) at 33,000 volts. Peak requirement is 7 MW and the contract calls for 9 MW. Interruption of power has been common in recent years because of drought. The percent of power interruption was 9% in 1979/80, 13% in 1980/81 and 14% in 1981/82. CCI completed in 1983 the installation of a 2.4 MW diesel generating plant, which has enough capacity to operate the combined raw mill and kiln departments of the planned new facility. The new plant will require 12 MW. Approval of the new linkage is automatic with the PIB license, which is pending.

9. Rail. The plant rail spur connects with the Mowrah-Bombay main line (broad gauge line), and the plant reports satisfactory service. Recently established regulations now require shipment of cement by .nit trains of no less than 1600 tons per train. As a result CCI is extending the track lengrh at the plant. Presently 80% of the Mandhar's production is shipped by rail. Adequate rail service is expected.

10. Road. The plant is well connected to the road net, and located only 20 km from Raipur.

11. Water.' Water is pumped in from the Khorun river for a distance of 10km, and no supply problems have been ;geported. Once -he plant converts to dry process operation the consumption of water .ill be reduced to less than 1/3 of the present consumption.

12. Transport Analysis. The transport requirements for the plant are sumarized In the table below: ANNEX4-5 -86 - Page 41

Distance Volu&q in 1,000 tons (km) Rail Road Input Limestone 11 - 630 Iron Ore 475 8 - Coal 200 80 - Slag 40 - 200 Pozzolan 16 40 Gypsum 560 34

Output Cement - 560 140

13. Environmental. The plant and the equipment will be designed to comply with the new standards drafted by the Indian StandarIs Institute for particulate emission, which set a limit of 250 mg/Nm3. No problems with solid waste or liquid effluents exist.

14. Project Management. The Mandhar project will be executed by CCI's project department, which has completed four 400,000 TPY cement plant projects during the last four years, and has three projects, each of 1 million TPY capacity, under implementation. During the course of all these projects the CCI staff has acquired extensive experience in designing and executing cement plant projects. For this project design and engineering will be provided under turnkey arrangement in connection with the large ICB equipment package. Equipment will be procured under ICB for the major packages (to be financed by the Bank) and by local competitive bidding for the small items produced in India. Civil _orks and erection will be awarded under local competitive bidding in two major packages (according to location). Electrical installationwill be bid as part of electrical supply contracts. A project general manager, located at Mandhar, will have overall project responsibility, and the project will be closely monitored by a project group at headquarters, which will receive project progress reports at regular intervals. A site manager, reporting to the general manager of project, will be responsible for the day-to-day activities in the field. CCI will act as general contractor for the project.

15. Implementation. The attached implementation chart shows award of the major equipment package by May 1987 and start of civil works by July 1987. Commissioning is scheduled for December 1989. The most critical stage is project approval by GOI through the Public Investment Board (PIB).

16. Training and Commission. CCI does not plan to contract outside help for training nor to send CCI personnel overseas for training. CCI's existing, modern dry process plants and the training facility at Neemuch provide ample facilities for training the Mandhar operations personnel. In addition, CCI has the opportunity tc participate in an industry-wide, infirmal arrangement for sending operating perscnnel for training at competitor plants with modern equipment. A special commissioning team will be assembled of personnel from the varicus plants with recent start-up experience. Considering the size and complexity of CCI's other projects ANNEX4-5 7 - Page 5

(and in particular the green fields projects) it should be easy for CCI to manage this project and the decision not to retain outside consultants seems justified. Between plant and quarry 806 people are employed. CCI plans to operate the converted plant without any additional hiring.

Industry Department October 1985 o H S a

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Iracetian6 I- HI ANNEX4-6 Page 1

INDIA - CEMENTINDUSTRY PROJECT

India Cement Ltd.: Sankarnagar Project Description

1. Project Summary. The project consists of converting the present Sankarnagarplant locatedin the Tirunelveli district, Tamil Nadu, from wet to dry processoperation. The presentcapacity of the five wet process kilns is 2,200 TPD of clinkercorresponding to 726,000TPY of clinker. The converted plant will have a clinkercapacity of 3,000 TPD (990,000TPY) corresponding to 1,042,000 TPY of cement. In additionto increasing production,the project will significantly improve fuel efficiency. The presentkilns operateat a fuel consumptionof 1,430 kcal/kg or 0.338 tons of coal per ton of clinker,while the proposednew kiln will require850 kcal/kgor a coal consumptionof 0.201 tons of coal per ton of clinker. The specificpower consumptionwill increasefrom 106 kWh/ton to 116 kWh/tonof cement.

2. OptionsConsidered. The processconversion can be done eitherby modifyingthe existingkilns or replacingthem with a new one. The capital cost of modificationof the existingkilns is lower than the cost of installinga new one, howeverthe benefitsderived from a new kiln, such as reducedfuel consumption,increased production, longer equipment life, and higher capacityutilization will in most cases make the installationof a new kiln the superioroption. In the preparationof this projectICL authorizeda detailedstudy of a semi-wetconversion for considerationand also evaluateddry processplants of 2,600 TFD and 3,000 TPD capacities. Table I presentsa comparisonof productioncapacities, energy consumption, energy cost and capitalcost of the existingplant and the three proposed options.

Table I

Kiln Fuel Rated Consumption Power Con- Cement Tons sumption Clinker Capacity Coal/Ton kWh/t Option Process Capacity (TPY) kcal/kg Clinker Cementa/

I Wet 2,200 795,000 1,440 0.337 105.5 II Semi-dry 2,600 900,000 1,100 0.260 116.0 III Dry 2,600 900,000 850 0.206 116.0 IV Dry 3,000 1,000,000 850 0.206 116.0 a/ Averagefor all cement,OPC + PPC at 50% each. After carefulanalysis of the four optionsit was found that option IV providedthe best returnon investment.The 3,000 tpd capacityis the maximum which can be sustained by the existing infrastructure.

3. EquipmentRequirelments. Analysis of materialflows in each processarea identifiedequipment to be modifiedor abandoned. 90 - ANNEX4-6 Page 2

(a) Equipment to be Modified: one 2,000 HP wet rawmill to be ca=verted to cement grinding if the existing cement mills will not attain rated output, two existing coal mills to fire the new kiln.

(b) Equipment to be Abandoned:

(i) the existing wet raw mills (one may be modified to grind cement);

(ii) slurry storage and kiln feed systems;

(iii) five wet process kilns including clinker coolers and dust collection equipment; and

(iv) four of the six coal mills.

(c) New Equipment: Primary limestone crusher, limestone and coal preblending, storage and reclamation system, raw grinding and drying system, 3,000 TPD preheater-precalcinerkiln and clinker cooler, electrostatic precipitator for cleaning kiln and raw mill exhaust gases, a 35-40 TPH coal mill with ESP dust collector, clinker silo, one rotary cement packing machine, a 110,000 volt substation and transformer, and a 2/4 MVA diesel generator.

4. Role of Bank in Technical Appraisal. During discussions of the technical features of the feasibility report, the mission suggested various modifications to the material handling system to reduce power consumption. The mission was also able to dissuade ICL from using multiclones for dedusting clinker cooler exhaust air which would have prevented ICL from complying with the new Indian standards for pollution control. In general, the project concept is sountd,well laid out and should provide a plant that is relatively easy to operate and maintain.

5. Raw Materials. Proven limestone reserves (to a depth of 30 meters) total 25.5 million tons of which 14.4 million tons is contained in ICL leased land and 11.1 million tons in land operated by independent quarry operators under contract to ICL. By quarrying to a depth of 72 meters an additional 30.3 million tons of limestone becomes available (currently classified as -indicated-reserves). The quarries are located from 3 to 15 km from the plant. Based on an annual consumption of 1,584,000 tons of limestone the present reserves would supply the proposed plant for 28 years. The geology of the limestone is complicated by local intrusives. The limestone is steeply dipping (80°), folded and intruded by igneous rock. By harvesting stone from a large number of quarries simultaneously, suitable chemistry can be maintained without sacrificing reserves. An overburden to limestone ratio of 2:1 will result by mining to a depth of 60 meters. Alkali and chloride levels are low enough to assure stable preheater operation. Some areas of the deposit are high in MgO but by careful blending from the various quarries, a suitable MgO level can be maintained without sacrificing reserves. An overburden to limestone ratio ANNEX4-6 - 91 - Page 3 of 2:1 will result by mining to a depth of 60 m. Alkali and chloride levels are low enough to assure stable preheater operation. Some areas of the deposit are high in MgO but by careful blending from the various quarries, a suitable MgO level can be maintained. ICL has initiated a comprehensive mining program which includes a major part of the quarry equipment necessary for the new plant. In addition, they are installing picking tables to improve limestone quality and extend quarry life beyond that currently proven.

7. Other Materials

(a) Red Mud: Iron-rich waste from the nearby Mettur aluminum plant which is used as a raw mix component. Ample quantity is available to supply the projected 30,000 TPY required. Delivery is by truck.

(b) Pozzolan: Two materials are used. They are fly ash and surki (a synthetic). Fly ash comprises 60% of the requirement. Both materials are trucked to the plant.

Cc) Gypsum: The deposit at Tuticorin, some 100 km distant, supplies current needs by truck delivery. Ample quantity is available.

(d) Coal: The present linkage is for 244,000 TPY. The estimated future consumption is 210,000 TPY. Shown below are sources of supply and modes of transportationestimated for the proposed plant.

Source Mode of Transport Distance, km Percent of Supply

Bengal/Bihar Rail/Ship/truck a/ 2,600 8 Singareni Rail b/ 1,600 36 Western Coalfields Rail b/ 1,759/1,959 37 Neyveli (Lignite) Truck 200 19 a! By ship to Madras, then truck to plant. b/ Loaded at mine on standard gauge rail but transloaded to narrow gauge for final delivery to plant.

Coal supplies have not been reliable both as to quality and delivery. ICL initiated use of lignite in 1982 and currently uses some 15-20% blended with coal.

Infrastructure

7. Power. The plant receives power at 11,000 volts from Tamil Nadu Electricity Board (TNSEB) under a contract for 15 MVA of capacity. The new plant will require 25 MVA, which has been the linkage applied for. Drought conditions during the last two years reduced power supply by about 50%. Accordingly, the plant is in the process of completing the installation &f 6 MVA of diesel generating sets, and 2/4 MVA of additional diesel generator ANNEX 4-6 - 92 ~ Page 4 capacity will be installed in connection with the proposed project. The 10 MVA of captive power capacity will permit the raw mill and kiln departments to operate during power cuts. In connection with the higher demand, grid voltage will be increased to 110,000 volts and new poverlines will be installed together with new substation and transformer station.

8. Rail. The plant is served by both broad and narrow gauge rail facilities. All of the coal shipments by rail originate on board gauge lines and are transloaded to narrow gauge before arriving at the plant. All shipments of cement leave on board gauge rail cars. ICL reports that plans have been worked out for replacing the narrow gauge rail by broad gauge so that transloadingof coal will be eliminated.

9. Road. The plant is located on State Highway 7 near Tirunelveli and receives the majority of supplies and raw materials by truck.

10. Water. The Tambraporni River supplies plant water. Adequate supply is reported. Consumption will drop to less than half the current rate. Pumping distance is 10 km.

11. Transport Analysis. The transport requirements for the project are summarized in the following table.

Distance Volume in 1,000 tons (kmn Rail Ship Road Input Limestone 2 to 15 - 1,584 Red Mud 8 - 30 Coal 2,600a/ - 17 17 1,600/1,800 75 7 - 1,759/1,959 77 - - Lignite 200 - - 42 Pozzolan 65 - 50b/ Gypsum 65 - - 70

Output Cement 420 - 622c/ a! By ship to Tuticorin then truck to plant. b/ Could be increased to 100,000 TPY by modifying wet raw mill to finish grinding. c/ Estimated.

12. Environmental Considerations. The plant will be designed and equipment specified to comply with the new standards drafted by the Indidn Standards Institute for particulate emission, which limits such particulate to 250 mg/Nm3. No problems with solid or liquid effluents exist.

13. Project Management. ICL will set up a project management group as shown on the attached organization chart. The company intends to retain a highly experienced foreign consultant who will be responsible for: ANNEX 4-6 93 Page 5 selection of process, plant layout, preparation of bid specification, bid evaluation, periodic project review, training, commissioning. The foreign consultant will also install a microcomputer system for project management and financial monitoring. An Indian consultant will be responsible for construction drawings and design of infrastructure. The major equipment packages will be bic tartly as turnkey.

14. Implementation. The attached implementation chart shows award of the major machinery contracts by November 1986. Civil works commences April 1987 and commissioning -- -1 take place October 1988, 23 months after placement of the major machin orders. The schedule is tight, but ICL has an experienced construction team, which has managed the ongoing rehabilitation projects. The equipment manufacturers both in India and overseas are not booked heavily and ICL can expect to obtain short delivery time on the equipment.

15. Training and Commissioning. ICL proposes to send key personnel to major machinery suppliers for training and within India for start-up and operations training on similar equipment. ICL also proposes to contract the foreign consultant for in-house training and for training of selected personnel abroad. The same consultant will also assist in plant commissioning. In addition, the company has dedicated a full-time repair and maintenance crew for commissioning and start-up, reporting directly to the project manager. The plant employs 2,314 people between plant and quarry. ICL plans to reduce this number to 1,554. Of the reduction of 760 people, 425 will be obtained by natural attrition, and 335 by severance arrangement.

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INDIA - CENENT INDUSTRY PROJECT

The KCP Ltd. Macherla Cement Factory

1. Project SuImary. The project consists of modernizing the present Macherla plant located in the Guntur district, Andhra Pradesh, by replacing the two present kilns with a new precalciner, preheater kiln. The capacity of the two present kilns (one wet process and one dry process) is 730 TPD of clinker corresponding to 254,000 TPY of cement. The new kiln will have a capacity of 1,200 TPD of clinker corresponding to 370,000 TPY of cement. The old kilns operate at 1,600 kcal/kg clinker while the new kiln will produce at 800 kcal/kg, a savings of 50Z. The new plant will have greater power efficiency with a projected consumption of 120 kWh/ton cement compared to 133 kWh/ton in the present plant.

2. Options Considered. Five options were considered for the process conversion or modernization of the plant. Two involved conversion of the wet kiln to dry process, and two considered a new preheater kiln without precalciner. The fifth involved the present configuration which was found optimum when layout, infrastructure limitations, market and raw material reserves were considered. The advantages of the chosen option are listed as:

(a) latest technology;

(b) low operating cost;

(c) no loss of current production;

(d) large reductions in fuel and electrical energy;

(e) ability to use lower-grade coal;

(f) ability to use lower-grade limestone which extends reserves and reduces quarry cost; and

(g) improved plant layout resulting in lower capital cost.

3. Equipment Requirements

(a) Equipment To Be Modified. Convert the limestone tramway from manual to mechanized unloading; secondary crusher by increasing grate openings; convert one dry rawmill to cement grinding; increase capacity of limestone tramway by new, larger motor drive and additional buckets. All buckets will be modified to bottom dump.

(b) Equipment To Be Abandoned. Existing wet and dry process kilns, with all auxiliaries. - 96 - ANNEX 4-7 Page 2

(c) New Equipment

(i) quarry, one 3.2 m3 loader, one 35 t dumper, lighting, miscellaneous tools for shop;

(ii) raw material handling and storage: one overhead traveling crane (10 t);

(iii) raw mill department: one 125-TPH vertical roller mill;

(iv) kiln department: one double-deck homogenizing and storage silos with 6,000 tons capacity;

(v) kiln department: one 1,200-TPD, 5-stage preheater kiln precalciner, one 17 TPH coal mill and dust collection, clinker cooler with baghouse and heat exchanger, clinker deep bucket conveyor;

Cvi) cement packing and bag-handling equipment: two new 60-TPH rotary packing machines and related handling equipment;

(vii) electrical infrastructure: new incomer panel boards, switchgear, breakers, motor control centers, metering, and distribution systems and captive power installation; and

(viii) instrumentation and process control: electronic weighfeeders, weighbins, PID controllers, programmable controllers, central control room, analog controllers for sequence interlocking, off-line x-ray analyzer utilizing manual sample preparation.

4. Raw Materials. The raw material deposits leased by KCP are located on the Macherla-Srisailam road 10 km from the plant. Total reserves exceed 32 million tons of which 13.6 million tons are contained in the Polepally leased area and 18.7 million tons in the Mandadi leased area. Thickness of the limestone averages 12.5 m and is covered with 1-8 m of calcareous clay. The limestone dips at 5-10SE. The content of alkalis and chlorides in the raw materials are only in trace amounts which make them suitable for the project. By installation of a preheater, precalciner coal ash absorption will be reduced to a significant degree which will permit use of lower-grade limestone and extend reserve life of the deposits. The proven reserves total 32 million tons which will provide approximately 50 years of limestone at a production rate of 400,000 TPY (clinker), the proposed plant capacity.

5. Other Materials

(a) Laterite. Purchased from Kavali, Nelur, A.P., 250 km.

(b) Bauxite. Purchased from Belgaum, 500 km. 97 - ANNEX4-7 Page 3

(c) Gypsum 20,000 tons per year by rail from Tuticorin, Tamil Nadu, a distance of about 600 km.

(d) Coal. Coal is transported by rail 300 km from Singareni. The future requirement is 90,000 TPY which is less than the present consumption of 110,000 TPY. At present the rail is meter gauge but Indian Railways is constructing a standard gauge line to Macherla which may be completed in 1987. In times of shortage, coal is obtained in bulk and hauled to the plant by truck about 200 km from the Hyderabad area.

Infrastructure

6. Power. The plant has installed equipment for receiving power at 132 volts, and is awaiting hook-up. The present sanctioned electrical demand is 6.5 MW but the converted plant will require 10 MW which has been applied for. APSEB has supplied adequate power without major outages and the additional power required will not present a problem. 1

7. Rail. Macherla is presently served by a meter gauge line which creates delays in shipments of materials in and cement out. A broad gauge line is under construction and is planned to be in operation serving Macherla in 1987.

8. Road. Macherla is well connected by roads to Guntur, Hyderabad and Vijaywada. The nearest city, Guntur, is about 120 km from the plant. A road exists between the quarry and plant which can be used to haul limestone in the event of tramway failure.

9. Water. Well water is available in ample quantity at the plant site.

10. Transport Analysis. The transport requirements for the plant are summarized below:

Distance Volume in 1,000 tons (km) Rail Tramwy Road Input Limestone 5.5 - 640 ropeway Laterite 250 - - 600 Bauxite 500 - - 6 Coal 300 90 - Gypsum 600 20 -

Output Cement 250 0 100% (250,QOO)

11. Environmental. The plant will install suitable cost control systems in order to comply with the proposed Indian Standard emission limit for particulate matter of 250 mg/Nm3. No solid waste or liquid effluent problems are known to exist. ANNEX 4-7 - 98 - Page 4

12. Project Management. The Macherla project will be executed by a team consisting of Senior Managers and engineers from the plant and corporate office. A consultant was retained to prepare the initial feasibility study and project report. ENTEC Consultancy Bureau of Madras will assist KCP with engineering for the electrical, instrumentationand control systems. KCP will receive assistance from their overseas partner throughout the project and during commissioning. A project manager located in their Madras office will have overall project responsibility. A Bombay civil contractor has been retained for the civil works. A site manager, reporting to the project director, will have day-to-day authority and responsibility for all field activities, providing liaison between contract operations. In order to prevent interference with the existing operatiots, a separate task force will be established to supervise erection, start-up and commission the new plant. A full-time maintenance crew will be available to the task force during start-up and commissioning to enhance schedule.

13. Implementation. The attached implementation schedule shows award for the major machinery contract by February 1986. KCP will place this order with KCP-Fuller, a joint venture between KCP and Fuller-USA. The specifications for the four ICB packages will be prepared as soon as the technical design data are received from KCP-Fuller. Civil works will commence November 1986 and commissioning is scheduled for December 1987, 22 months after placement of the major machinery order.

14. Training and Commissioning. A training program for key operating personnel will be conducted by KCP's US partner. Mechanical, electrical and instrumentation maintenance personnel will receive training as well as process control and laboratory personnel. Training methods will include lectures, case studies, process simulation and actual operation experience in other similar existing plants. The plant employs 400 people only and 50 people in the quarry. The company will rely on natural attrition to reduce staff. No additional personnel will be hired.

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INDIA - CEMENT INDUSTRY PROJECT

Technical Assistance to Cement Industry

Introduction

1. The Indian Cement Industry is going through a phase of unprecedented growth in installed capacity. The Government of India (GO) has projected the installed capacity to rise to about 60 million tons by 1989/90, the last year of the Seventh Five-Year Plan period, from the present capacity of 42.5 million tons per year. It has further projected the capacity to increase to about 99 million tous by 2000. Due to this unprecedented growth, the demand for trained personnel has also grown very rapidly and individual cement plant units are experiencing a hign turn-over rate at the operational and technical level as a result of competition among companies for the insufficient number of skilled staff. Unless intensive and systematic efforts are undertaken to develop a aufficiently large pool of human resources, the long-range growth of the cement industry itself could be jeopardized.

Manower Needs

2. GOI appointed a panel to survey manpower requirements for the Indian cement industry. According to the findings of the panel, the present total direct employment in the cement industry is estimated to be about 100,000 and it is expected to go up by about 25,000 during the Seventh Five-Year Plan, i.e., 1985 to 1990. The direct employment is further expected to increase by about 60,000, thus reaching a total figure of 185,000 by 2000. The bulk of additional requirements during the Seventh Five-Year Plan period is expected to be in the categories of skilled technicians, operators, foremen, and junior officers. It is evident that the 25% increase in manpower cannot be met without large-scale planned efforts to train personnel in specific, identified disciplines. Failure to attain the required skills of cement plant personnel would prevent the industry from obtaining the projected capacity of the many new plants. The new large plants utilizing sophisticated control system are particularly sensitive to the skill level of plant operators and training should, therefore, be planned to meet this high-level skill resulting from the change to higher level technology.

Scope of the Training Component

3. The training component will be directed to all levels of cement company staff, but will emphasize both the pre- and post-entry training of:

(a) lower-level maintenance technicians: fitters, welders, instrument mechanics, diesel mechanics, and masons;

(b) higher-level maintenance technicians engaged in instrumentation and processes control, electronics, power electronics, and ANNEX 4-8 - 101 - Page 2

programmable controls, who will receive specialized training on the following equipment: gear boxes, material-handling equipment, fluid-handling equipment, pollution control equipment, and cement manufacturing equipment (e.g., mills, kilns); (c) plant operators: kiln operators (burners),mill operators, controlroom operators,heavy equipmentoperations, and laboratory technicians.

(d) first-level supervisors, i.e., whose training poses an uncommon problem in that insufficient numbers are being supplied through promotion and will have to be recruited from among fresh diploma holders and then trained in both the technical and supervisory aspects of cement plant operations and maintenance.

4. To define medium- and long-range manpower and training needs and a subsector strategy for addressingthose needs, the CementManufacturers' Association (CHA) will sponsor a comprehensive manpower development study (see Terms of Reference, Attachment 1). The study will include, inter alia, an assessment of alternative training arrangements such as (a) the feasibility of expanding industry-owned training facilities and 'b) technical and physical inputs needed by the country's Industrial Training Institutes (ITIs) and Advanced Training Institutes (ATIs). These institutions are the source of basic training for maintenance technicians t the lower and higher levels respectively. Additional inputs would enable them to teach cement technology at the pre- and post-recruitment stages.

5. Besides the manpower development study and inputs to the ATIs and ITIs, the project will finance training equipment, training consultancy services, and overseas training required by the six subproject companies (see breakdown of lending and schedule of implementation in Attachments 2 and 3). For each subproject unit, there will be funds available to acquire process simulation software and requisite hardware. Associated Cement Companies Limited (ACC) and the Cement Corporation of India (CCI) will upgrade and expand in-house training facilities through the purchase of equipment, as well as through consultancy. It is envisaged that this technical assistance vill build up in-house capacity to develop curricula and training trainers to the point of reaching training self-sufficiency (see Attachment 4). Several companies will sent staff overseas. Technical and managerial staff will receive specialized training in operations and maintenance at suppliers" plants, and company training officers will be trained how to organize and develop fully the training function at the company and plant levels.

Industry Department December 1985 ANNEX 4-8 Attachment I - 102 - Page I

INDIA - CEMENT INDUSTRY PROJECT

Manpower Development Study

Terms of Reference

Introduction

l. The Indian Cement Industry is going through a phase of unprecedented growth in installed capacity. The Government of India has projected the installed capacity to rise to about 60 million tons by 1989/90, the last year of the Seventh Five-Year Plan period, from the present capacity of 42.3 million tons per year. They have further projected the capacity to increase to about 99 million tons by 2000. Due to this unprecedented growth, the demand for trained personnel has also grown very rapidly. As a result, individual cement plant units are experiencing a high turn-over rate among at the operational and technical level as a result of competition among companies for the insufficient. number of skilled staff. Unless intensive and systematic efforts are undertaken to develop a sufficiently large pool of human resources, the long-rangegrowth of the cement industry itself could be jeopardized. The advent of modern technology and higher degree of mechanization provides an opportunity to establish new standards for labor productivity.

2. The Cement Manufacturers' Association (CMA) proposes to carry out a study leading to the development of a comprehensive subsector manpower development strategy. The study will identify and describe the industry's requirements for skilled manpower through 1995, which would permit the attainment of optimal levels of operational efficiency and resource utilization in cement production. The strategy would enhance overall manpower planning at the macro and micro levels in terms of both numbers and skill needs of cement company personnel. It would provide for optimal utilization of existing human resources and underpin systematic retraining. Through the efficientuse of new technology, it would lower production costs and upgrade the quality of cement.

Objectives of the Study

3. The objective of the study would be to identify practices and procedures for developing the skills necessary to operate and maintain cement plants and to apply the latest technology, by:

(a) assessing the requirements of the industry for pre- and post-entry training, as well as those for recycling-and retraining of staff;

(b) assessing the present and potential contribution of training institutions operated by the national and state governments;

(c) examine and evaluate existing plans and proposals for industry-sponsored training facilities; and ANNEX4-8 Attachment 1 - 103 - Page 2

(d) prepare (i) terms of referencefor technicalassistance programs to review and modify curricula and to train trainers at internal and externaltraining institutions, and (ii) equipmentlists for these institutions.

Scope of the Study

4. The study will be carriedout in three phases:Preparation,'Data Collection,and Data Analysisand ReportPreparation.

Phase I: Preparation

5. During this phase, the consultantswill be responsiblefor:

(a) assistingTAG in draftinga charter. TAG will have overall responsiblityfor supervision,guidance, and monitoringof the consultants'work;

(b) clarifyingwith TAG terms of referenceand the kind and amount of logistical support that TAG can provide the consultants; Cc) selecting,in consultationwith TAG, a representativesample of companiesto be visitedby the cont-ultants;

(d) preparinga standardset of formatsfor manpowerand in-service training inventories to be distributed to all cement companies in India. All formats will show breakdowns of staff categories in the followingway: a separatecategory for each benchmark positionin which the incumbentis a graduateengineer, diploma holder,or skilledworker engaged in mining,processing, or maintenance,with remainingstaff grouped into the broad occupationalcategories of corporateplanning, administrative supportservices, financial support services, and unskilled workers. The formats will be designed to quantify:

(i) currentstaffing strength with breakdownsby age group;

(ii) highest level of educationalattainment, to includea separate breakdown for engineers with MBAs; and

(iii) in-servicetraining broken down by mode (i.e., formal, or institutionalized,and non-formal) and category of training (i.e., induction training, basic training, refresher training, retraining, management development). In-service training will be quantified in terms of both trainee places and man weeks of training. In addition, explicit instructions for completing the forms and a glossary of trainingterminology will be attached;

(e) preparingquestionnaires to accompanythe above forms, requesting information on: ANNEX 4-8 Attachment 1 104 - Page 3

(i) companypolicies on the level of sparespurchased from suppliers in relation to spares manufactured in company workshops, insofar as this would affect on maintenance labor complement;

(ii) training policy and strategy;

(iii) organizational locus of training;

(iv) profile of in-house training staff;

(v) staff and managementdevelopment plans in relationto personnelpolicies and procedures;

(vi) the company's/plant'sapproach to assessingtraining needs;

(vii) descriptionof in-housetraining programs and activities;

(viii) performance bottlenecks and the specific skills (linked to benchmark positions or broad occupational groupings) that must be improvedto remove those bottlenecks;

(ix) institutionalweaknesses and the specificskills that must be improved to strengthen managerial capacity;

(x) use of educationalaids and media production,including mimeographed handouts;

(xi) mechanismsfor evaluatingtraining effectiveness;

(xii) constraintsto manpowerdevelopment (e.g., budget allocations,training staff, inabilityto retainqualified staff, inaccessibilityof in-servicetraining resources/facilities);

(xiii) quality and relevance of pre-entry education and training, with particular attention to the Advanced Training Institutes (ATIs) and Industrial Training Institutes (ITIs) and their potentialcontribution to pre- and in-service training;

(xiv) demand for in-service training facilities shared with other cement companies; and (xv) in the professionaljudgment of the consultants,all otber matters relevantto the objectivesof the surveyand its analytical and reporting requirements; (f) assistingTAG in disseminatingthe forms and questionnaires describedin paragraphs(c) and (d) above; ANNEX4-8 Attachment I - 105 - Page 4

(g) planning and organizing a Management Seminar on Manpower Development of two to three days' duration. The objectiveof the seminar will be to introduce the methodology of the study and explain the purpose of the data collection exercise, as well as providing adequate background information and guidelines on completing the forms. The seminar will include lectures on topics such as manpower forecasting and planning, institutional analysis, performance appraisal, training needs assessment, and management development followed up by workshops and small group discussions on the data collection forms intended to help solve problemsof definition,nomenclature, and personnel/trainingdata classification.It is expectedthat at least one seniormanager and one personnelor trainingofficer from each cementcompany '"n India,and a numberof director-levelstaff from external trainingsupport agencies, will be in=-itedto participatein the seminar;

(h) establishingtogether with TAG criteriafor reviewand analysis of data; and

1i) agreeingwith TAG on the structure,content, and formatof the final report.

Phase II: Data Collection

6. During this phase, the consultantswill be responsiblefor:

(a) conductingthe ManagementSeminar on ManpowerDevelopment;

(b) visiting educational and trainingagencies and institutions,such as the National Cement and Building Materials Institute (formerly called the Cement Research Institute), Institute of Manpower Development, Directorate of Employment and Training (Ministry of Labor), selected ATIs and ITIs, and corresponding state agencies responsible for the ITIs, to define the scope of their contribution to industry manpower development and to explore their future roles. Two ATIs will be selected in consultation with TAG, with a view of introducinga follow-upcourse relevant to cement technology. Four to six ITIs will be selected in consultation with TAG, on the basis of geographical proximity to areas vith heavy concentrations of ceaent plants, with a view to establishing six-month, specialized training programs for the cement industry at the pre-recruitment stage. Discussions with officers at all agencies and institutions will focus on the training of maintenance technicians, plant operators, and first-levelsupervisors, with particularemphasis on instrumentationand processcontrol, electronics, mechanical equipment, maintenance, and heavy earth-moving machinery; and

(c) visiting companies' headquarters and plants to assist with the data collection exercise by further clarification of methodol gy ANNEX4-8 Attachment 1 - 106 - Page 5

and terminology to ensure the reliability and uniformity of the data. The visits will also involveinterviewing senior officials and engineers to follow up on and clarifydata being suppliedin the questionnaires(para. 5(e)).

Phase III: Data Analysisand Report Preparation

7. Duringthis phase, the consultantswill be responsiblefor:

(a) assessingexisting manning levelsand forecastingthe industry's requirementsfor trained manpowerthrough the end of 1995, by benchmarkposition and broad occupationalgrouping, consistent with internationalstandards for establishingmanpower coefficientsto optimizelabor productivity;

(b) assessingexisting training activities, programs, and resources both within and external to the industryin terms of their qualitativeand quantitativeability to satisfy new skill requirementsprecipitated by modern technologyand higher degree of mechanization;

Cc) assessingserious operational deficiencies and institutional weaknessesresulting from lack of skills,with a rankingof correspondingbenchmark positions in terms of prioritiesfor short-,medium-, and long-termcorrective action; and

Cd) outliningin depth a range of alternativesfor addressingthe industry'srequirements for trainedmanpower over the next ten years. These alternativeswould take into account:

(I) trainingapproaches for correctingskill deficiencies, particularlythose resultingfrom the introductionof modern technology;

(ii) advantages and disadvantages of establishingnew training facilitiesand modifying existing ones within the subsector. The consultants will specify various financing and funding arrangements and means of apportioning trainee places among cement companies, and geographic location of possible facilities. They will raise and provide advice on critical issues relating to ownership of, and operating responsibility for, varioustraining facilities, i.e., should new or expanded training centers be owned and operated by individual companies, through bilateral and multilateralagreement, or under the auspices of CKA? and

(iii) advantagesand disadvantagesof establishinglinkages with formalvocational training systems under the Ministryof Labor and state governments. The consultantswill assess the viabilityof desirablelinkages and specifyadditional inputs needed by these institutions to build up their ANNEX 4-8 Attachment1 - 107 - Page 6

capacityto teach cement technology. Such inputs are likely to includetechnical assistance for (a) curriculum developmentand the trainingof trainers,and (b) procurement of laboratory and workshop equipment, includingthe costs and financialarrangements for these inputs.

Final Reports

8. The consultantswill submit th-reeseparate final reports covering:

(a) findingsof manpowerand trainingstudies, with issues and alternativesolutions, including a plan for buildingup training expertiseindustrywide through trainingof in-planttrainers and trainingofficer corps, and throughimproving the management, instruction,and curriculaat company-ownedtraining centers;

(b) proposalfor additionaltraining facilities to be owned and operatedwithin the industry,including blueprints, equipment lists, and a detailedinvestment plan; and

(c) detailedaction plan for upgradingATIs and ITIs, and any other traininginstitution identified in the study as a potential sourceof pre- and in-servicetraining, in respectof the introductionof cement technology. This will includeterms of referencefor technicalassistance for curriculumdevelopment and trainingof trainers,to be funded under the proposedBank loan, and preparationof detailedtraining equipment lists, also to be financedunder the proposedBank loan.

Consultant Team

9. The study would require a total of 33 man-months of consultancy over a six-monthperiod. It is expected that foreign consulting firms bidding for the contractwill make an effo_z to rely on local consultant expertiseto the extentit is available. An inter-disciplinaryteam, which will reportdirectly to TAG, will be composedof six expertswith following backgrounds and lead responsibilities:

(a) One industrial training specialist, with ten years' internatibnal experience in implementing training programs in both private and publicsectors, who will lead the team by preparinga detailed work program and assigningtasks and additionalresponsibilities (six months);

(b) One chemical or industrial engineer, with ten years' operational experiencein the cementindustry and at least five years' experiencein managementand training, who will delineate benchmark positions in terms of tasks and the skills needed to perform those tasks (six months); ANNEX 4-8 Attachment 1 -108 - Page 7

(c) One technical/vocational educator, with five years' experience in developing skills in an industrial setting who will (a) examine and compare internal and external training systems against international standards; (b) propose alternative schemes of pre- and in-service education and training; and (c) prepare terms of reference for technical assistance for curriculum and traiLningof trainers and detailed equipment lists (six months);

(d) One architect, with five years' experience in planning education and training facilities, who will estimate costs of civil works for additional training facilities (three months);

(e) One labor/manpower economist, who will forecast manpower requirements and refine ratios of staff time in relation to potential labor productivity (six months); and

(f) One management development specialist, who will examine existing management development schemes and recommend alternatives for improving managerial capacity and effectiveness (six months).

Timetable

10. Letter of Invitation to Bid by Jan. 15, 1986 Closing Date for Submission of Bids March 1, 1986 Bid Evaluation March 1986 Negotiation and Award of Contract April 1986

Phase I: Survey Preparation June 1986

Phase II: Data Collection (a) management seminar on manpower development July 1986 (b) visits to external institutions July 1986 (c) visits to companies and plants August 1986

Phase III: Data Analysis and Report Preparation , (a) training facility feasibility study Aug. to Sept. 1986 (b) report on assistance to ATIs/ITIs Aug. to Oct. 1986 (c) report on subsector training strategy Sept. to Nov. 1986

Submission of Final Report by Dec. 15, 1986

Industry Department December 1985 Project-RelatedTrmininn Coeponent BaseCost Estimates to be Financed

TrainingEquipment Experts' Services OverseasTraining

Other Manpower Plant/Equipeent Training Project Process Equipmnt CurriculueTraining of Development 0 i N Officers' Institution Simulator i Aids Subtotal RevieN Trainers Study Subtotals(by suppliers) Course Subtotals Total

USn USS am US1"N i USMN u U19s/ N aIm UN$ a/ US$N i/i S$N a/ US1 us1n PARTCl ACC Headquarters 0.300 0.300 9 0.036 9 0.036 0,336 KymareTC 0.362 0.362 27 0.324 30 0.360 57 0.684 1.046 Nadukkarai 0.038 0.039 0.046 0 0.0460.085 Shahibad 0.038 0.038 0.115 0 0.1150.154 - Subtotal 0.300 0.438 0.738 27 0.324 30 0.360 57 0.684 9 0.036 9 0.036 1.459 CCII Headquarters 0.0690.069 300 0.231 300 0.2310.300 leeeuchTC 0.150 0.246 0.396 27 0.324 30 0.360 57 0.694 1.090 HyderabadTC 0.150 0.154 0.304 0.304 Plants 0.154 0.154 0.154 Subtotal 0.300 0.6230.923 27 0.324 30 0.360 57 0.604300 0.231 0.000300 0.231 1.838 Oirla 0.150 0.150 3 0.012 3 0.012 0.162 ICL 0.150 0.150 9 0.068 9 0.088 0.238 KCP 0.150 0.150 0.150 SOC 0.150 0.150 3 0.012 3 0.0120.162 ; b

PARTC2 CM/TAG 33 0.39633 0.396 0.396 ATII ITIs 0.8640.864 10 0.120 10 0.120 20 0.24 1.104

Totals 1.200 1.926 3.12664 0.768 70 0.840 33 0.396 1672.004 309 0.319 15 0.060324 0.379 5.508 ------ANNEX 4-8 Attachment 2 -110- Page 2

CEMNETCORPORATION OF INDIA

EquipmoentList

A. kemmuchTraining Institute Rs. US*

Blowupsand working odels of cement plant equipment 500,000 38,462 Books 200,000 15,395 Equipmentfor developing video programs 100,000 7,692 Equipmentfor media productions (e.g., slides) 100,000 7,692 Photocopy Machine 100,000 7,692 YCRwtih monitor and recordedcassettes 200,000 [5,3E5 Workshopand laboratory equipment 2,000,000 153,846 (vainly electrical, electronic, and instrumentation) Subtotal 3,200,000 246,154

B. Unit Training Departments

Audiovisual aids 600,000 46,154 Diowupsand working modelsof cemnt plant equipment 500,000 38,462 Books 100,000 7,692 Educational films and cassettes 200,000 15,3B5 Furniture and Fixtures 200,000 15,385 Office Equipent 400,000 30,769 Subtotal 2,000,000 153,846

C. CorporateTraining Departent

Books 200,000 15,385 Furniture and Fixtures 100,000 7,692 Office Equipment 200,000 15,385 Training aids 600,000 46,154 Subtotal 900,000 69,231

3. ProposedTraining Center- Hyderabad

Blowupand working modeLsof cement plant equipment 500,000 3S,462 Books 200,000 15,385 Furniture and Fixtures 500,000 38,462 Office Equipment 200,000 15,385 Training aids 600,000 46,154 Subtotal 2,000,000 153,846

Total 8,100,000 623,077 ANNEX 4-8 - 11 1 - Attachment 3 Page 1

INULENENTATIDSCHEDULE

1995 199& 1987 I199 im

uarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

PARTCl

Equipment Preparation of TenderDocUments Bid Evaluation Awardof Contract Delivery of Equipament

Consultancy Preparation of Tender Documents BidEvaluation Awardof Contract Delivery of Services

OverseasTraining e. PARTC2

Equipment AT[slITls Preparation of Tender Dhcuments BidEvaluation kward of Contract Delivery of Equipment

Consultancy ATIsI ITls Preparation of Tender Documents Did Evaluation Awardof Contract Delivery of Services HhnpowerDevelopment Study Prteparation of Teder Doeuments Did Evalution Negotiation and Awardof Cortract Phase 1: Survey Preparation Phase II: Data Collection (a) managementseminar on manpoer developmnt (b) risits to external institutions (c) vists to companiesand plaits Phase Ill: Data Analysis and ReportPreparation (a) training facility feasibility study 1b) repwt on asistance to ATIslITIs ic) report on subsector apowerdevelopmt strategy Submissio of Final Reports hKAPOVEROEYELOPIENT STUDY IPLENENTATINSCHEDULE

3986

Jan FebNar Apr MayJun Jul Aug Sep Oct NovDOec _------Letterof Invitationto Did BidEvaluation ---- kegotationandAward of Contract -- FbaseIs Preparation Phaus11 DataCollection (a) uanageuntsesinar on unpowerdevelopmnt .... lb)wisits toexternal institutions .... tc)vists to coapaniesand plants Phaseflit DataAsalysis sad Report Preparation (a)training facility feasibility study ------lb)report an assistance toATIsiTIus ...... lc)report on subsector manpower developeent strategy ------SubeissionofFinal Reports -----

I-

w ANNEX 4-8 Attachment4 - 113 - Page I

INDIA - CEMENTINDUSTRY PROJECT

Cement Corporation of India

Training Consultancy

Terms of Reference

Introduction

1. The Cement Corporation of India (CCI) takes a systematic, comprehensive approach to manpower development. The training function ia well established companywide, and it is being expanded to provide each unit within the companywith one part-time training officer and one full-tise instructor. In fact, the company is close to becoming self-sufficient in training. Technicalassistance, proposed by CCI and reviewedwith the Bank post-appraisal training mission, is needed for curriculum review and training of trainers to address special training needs arising from recent technological advance in the conversion to dry processing. The emphasis will be on helping the professional training staff at the company's Neemuch Training Institute (NTI) to accomplish these objectivestheirelves rather than performing the tasks for them.

ObJectives

2. The objectives of this training consultancy would be to update the curriculum at NTI and train in-plant instructors, and at the same time help CCI become self-sufficient in training by strengthening the capacity the NTI staff to develop its own training modules and train its own trainers. CurriculumReview

3. The consultantswill be responsiblefor assistingNTI staff in:

(a) describing,within each broad occupationalgrouping (executives,supervisors, operations), key benchmarkpositions, i.e., job categories with functions critical to the company's plannedexpansion in installedcapacity, conversion to dry processing, and overall objectives. Such description is to include functions, duties, responsibilities, tasks, and skills needed to carry out those tasks, specifically including those skills required by the introduction of new technology (6 weeks);

(b) interviewing key plant personnel at all levels to identify performance bottlenecks and, in aggregate, the specific skills (matched against standard bencbhark requirements) that must be improved in order to remove the bottlenecks, including the removal of skill deficiencies arising from the introduction of new technology (5 weeks); ANNEX4-8 Attachment 4 - 114 - Page 2

(c) interviewing key administrative and financial personnel at all levelsto identifyinstitutional weaknesses and, in aggregate, the specificskills (matchedagainst standard benchmark requirements)that must be improvedin order to strengthen mnnagerialcapacity (3 weeks);

(d) assessingthe contentand methodologyof existingtraining programs,as well as their relevanceto trainingneeds and the trainingsituation or purpose(i.e., whether the programis intendedas inductiontraining, basic training,refresher training,retraining or managementdevelopment). This will include monitoring and evaluationand strengtheningCCI's capacity to assess and meet its own training needs (7 weeks); and

(e) implementing recommended improvements to the training programs, including monitoring and evaluation, and strengthening in-house capacity for curriculum development (16 weeks).

Training of Trainers

4. The consultants will be responsible for:

(a) asssistingin developingor adaptinga set of modulesfor the trainingof trainersspecific to the cementindustry and conversionto dry processing. These moduleswill correspondwith the broad areas of expertiseof the existinginstructors at the NeesuchTraining Institute and will introducenew areas in which upgradedskills are needed (12 weeks);

(b) deliveryingthe completeset of modules to all instructors throughlectures, seminars, and workshops(8 weeks);

(c) coachingeach instructorin trainingof trainersin his respectivearea of expertise. The objectivewould be to provide him with the capabilityof traininginstructors at operating units to developthe skillsand knowledgeof plant personnelin respectof subjectsand operationalfunctions relevant to the area of expertise(4 weeks);and

(d) monitoringand evaluationof the transferof the completeset of modules to selectedunits to ensure the self-contained, self-sustainingability of CCI to train its own in-house trainers (16 weeks).

ConsultantTeam

5. The consultancywould requirea total of 57 man-monthsover a 19-month period. It is expected that foreign consultiag firms Lidding on the contractwill make an effort to rely on local consultantexpertise to the extentit is available. The consultantteam will be composed of: ARME 4-B Attachbennt 4 - 115 - Page 3

(a) one chemical or industrial engineer, with at least ten years' operational experience in the cement industry and five years' experience in plant management and training, who will lead the team, prepare the work program, and asssign tasks;

(b) one technical/vocational educator, with at least five years' experience in developing skills in an industrial setting; and

(c) one management development specialist.

Industry Departennt December 1985 - 116- AMEX 5-1 IfDIA - CMENT InDUSTRY PROJECT

TROLPRIJECT MST t MNEC 1LU

1985/5 194 - 1WS 193/9 Total Total Total lota Inclo rareign Lcl rnip Lo reip Lol rarep Local ardip Cost Cot

lam cut ul I Site ewla nt LOD 0.00 L.00 LO. 1OO OD00 LOU 0.00 0.00 O LM CivilUorks 6.20 0.05 18.60 0L.0 6.29 O.00 0.00 31.00 9.0 31.00 2L38 roundatians 0.00 109 LO.0 0.00 L.ao LOD LoD LoB o.oo LoO LOU 00 Jhchinerwyfipent 17.71 27.31 46.51 71.60 7.11 8.71 .00 .00 71.36 107.66 179.01 13.77 SW 1.71 0.70 1.86 2.73 0.29 0.35 .09 .00 Z.85 3.78 6.63 0.51 Trapotca freight 0.81 0.00 6.00 0.00 1.02 0.08 .00 .W0 7.83 0.00 7.93 i.60 Erectio/Installation 3.58 0.00 10.71 0.00 3.58 0.00 LOD L.oa 17.90 LOD 17.90 1.31 Enginrriq/tonultancy 0.69 1.96 0.5Z 1.19 0.09 0.26 (.00) (.0) 1.30 3.70 S.U00 13 Pract tiaament 1.00 0.00 3.00 0.00 1.00 0.00 L 0 L.0 S.00 0.00 5.09 0.3

TotadBse Cut 39.70 29.97 87.23 7'.82 19.32 9.35 .00 .0m 137.21 115.13 252.39 19.t1 ysicalCouingees 2.75 1.50 7.55 3.79 1.77 O17 .00 .DO 12.00 5.76 17.81 1.37 PriceContiagecies 1.58 1.5 11.10 5.9? 1.21 1.51 .0A .00 16.91 9.06 2U.98 1.92

InstalledCost 35.03 32.05 105.88 85.58 Z5.33 11.33 .00 .00 166.21 129.X Z955.1922.71 InterestDuring Construct 2.91 1.86 11.62 10.1 17.56 11.17 0.09 0.01 31.19 23.77 57.5 1.16

Fnaing Rodrent 37.01 33.91 120.50 56.02 12.89 22.80 .00 .a 200.13 152.72 353.15 27.17 ((zel. Tames9 hUes) taxesL ties 6.35 -- S8.31 -- 6.59 -- .00 -- 71.29 -- 71.ZB S.18

TotalFiwing lqutroet 13.39 33.91 17R.81 9.02 19.8 22.80 .00 .00 271.70 152.72 12t.t2 32.65

RWcnmRuRI COiwSION 1fC! FINENmCINN

85/86 86/87 87rB8 /8/9 TOTL TOTOLI Total X Total iLLIO ------(USS) Nettax Inctax

INiUDW 31.79 07.1AN15.22 .00 157.65 '2.13 11.6 37.1 OIlRLemN 33.33 123.71 21.B5 .09 181.89 13.99 51.5 1Z.9 CQLITIYICRSISEN. 9.27 13.t1 32. .00 8M.88 6.53 21.0 20.0

TOTLflIRNG RIEgNT 77.29 271.86 72.28 .00 121.12 32.65 129.Z 100.0

MMRRIIO 3e.12 Bt.16 55.15 MR 8.20

I.ndustry Department October 1985 - 117 - ANNEX5-2 INDIA - CEMENTINDUSTRY PROJECT

TOEALPET COSTFE IIC PIMT

1995/116 19647 1987/8 118/95 ToTal Ttal Total Total Local Foreign Local foreign Local Foreign Loal Feign Local Foreign Cst Cost

baseCost LaudI SiteDOsulopment 2.22 0.00 1. .D 0L00 LuM LUM 0L0 3.70 LM 3.70 0.28 CigilUorks 15.60 0.00 1.60 0.00 46.o 0.00 (.09) 0.00 101.so L.W 101.00 9.0 Foundations LAO 0.00 09 0900 0 0.00LO. D.000.00 0.0 L 0DLOD fbchinTry/Eipent 27.86 31.43 113.73 110.77 76.32 58.9Z 2.57 S.t5 ZZO.19206.17 126.96 32.89 Spares 1.11 0.53 1.55 3.31 3.05 .04 0.10 O.ZO 8.82 6.11 l.93 1.15 frawsportcanfreight 1.03 0.00 9.56 L.oa 6.50 0.00 0.56 LMa 17.65 l.00 17.65 1.36 Erection/Installation 0.00 LO.D 10.05 L.Uo Z3.15 0.00 .00 0.0 33.50 LOU 33.50 Z.58 Engineeringdensultancy1.13 L.9S 1.11 2.86 2.Z9 5.72 0.85 1.77 5.70 11.30 29.00 1.51 Projectt1anagement 1.21 .O 3.63 0.00 7.26 D.00 .00 LOU 12.10 LQ 12.10 8.93

TotalBase Cost 5L16 32.91 105.71 116.97 165.67 66.59 t.09 18.12 OS.97 226.88 632.9 19.68 PhysicalContinge es 3.55 1.69 13.60 5.89 11.10 3.11 0.25 0.SS 31.79 11.53 13.33 3.33 PriceContingenies 2.55 0.64 23.31 9.22 36.17 10.71 1.26 2.65 63.32 23.21 86.57 6.66

InstalledCost 56.56 35.21 2.69 132.07 216.Z3 80.72 5.61 13.61 59.09 261.65 '62.73 50.67 InterestDuring Construct 3.50 Z.06 Z7.92 11.19 61.19 29.07 27.36 11.89 13.26 57.20 180.16 13.89

FinancingReqwrunmt 60.06 37.30 250.61 116.25 238.71 109.l0 32.9' 25.50 621.31 318.85 913 0 72.55 (Ed. Taxes6 Duties) Taxes8 Duties 10.52 -- 86.61 -- 53.09 -- 3.83 -- 151.01 -- 151.01 11.85

TotalFinancing Raeirument 70.57 37.30 337.22 116.25 333.79 109.8O36.90 25.50 778.38 318.B51,097.23 9t.10

RCCSNRIIR8fi LOHUERSIN PRROJEC7 FIINCsi PLAN

85i06 96/C7 97/88 s8es 10TR TOTALZ Total Total ------tILLIDNRS. ------(.(LSS) Nettax Inctax

IBDLOAN 13.66 189.71 112.91 19.36 361.67 z8.05 38.7 33.2 OT111LORN 51.30 232.89 222.21 3.7 513.11 39.17I 51.1 6.9 EQUITWCRSH6ER. 9.91 60.87 108.11 I.21 2159.1516.88 Z3.3 20.0

TOTRLFINRNCING EOUIRIT 107.87 183.17 t13.59 6Z.311,057.Z3 91.19 116.3 100.0

M RATIO 91.09 97.13 76.Z1 35.65 89.20

Industry Department October 1985 - 118 -

INDIA - CEMENTINDUSTRY POJECT ANNEX 53

TOTEPOECT COST FOR DIU JUTE

190596 1916/9? 1907/U 19945 -- Total Total 4otd Total Local Foreign Local Foreign Ueal Foreip Loal Foreign Local forein C cost ~~~~~~~~~~~13fLT ------I Ust Jil. bveCost LandS SiteDureloet 0.00 0.0L 0.20 L.0 0.70 L.U 0.10 0.90 1.0 0.W0 1.00 0.0L BildingsI Cuil Uorks 0.00 L.a 11.89 0.09 39.5 0.00 5.50 0.oo E5B 0.oo 5.09 1.23 rudtionsfInfrastructue O.00 0. 0 0.09. 0.00 S.S 0.00L 15 13.59 0.00 13.59 1.01 WachirVt Equipen'n 0.00 .OU 18.19 16.06 115.69 29.17 31.75 13.31 195.9? 57.53 253.50 19.50 Spres 0.09 0.80 2.31 0.80 1.28 1.41 1.32 .R6 7.95 2.1 10.83 O.B3 TraLsport£ Ocen Freight 0.00 9.90 3.00 1.62 5.56 3.02 1.95 1.33 10.41 5.97 16.33 1.26 Erectionnstallation 0.00 0.00 3.2 0.13 12.86 0.79 1.66 0.35 ZO.51 1.56 22.5 1.73 Engineering/Consultay 9.OD 0.00 1.65 0.00 Z.9 o0.00 0.50 O.K 5.9 LU S.9 LIZO

TotalBase Cost 0.00 9.00 70.11 18.91 189.55 33.30 50.17 15.65 310.2? 67.51 378.21 25.09 PhysiclContingencies 0.0 0.0 1.2 0.0 12. 1.5 3.0 0.6 19.8 2.9 22.7 1.7 PriceContingecies 0.0 0.0 6.9 1.0 35.0 t.1 13.9 3.1 55.6 9.8 61.t S.0

InstalledCost 0.0 0.0 91.1 20.7 237.6 39.3 67.0 19.7 385.7 79.6 165.3 35.1 Interest ur Construction 0.0 0.0 5.7 1.1 27.8 5.6 21.5 1.5 55.1 1t.0 70.1 5.1

Finacinglequirment 0.0 0.0 06.9 2Z.2 265.1 11.9 91.S 2t.5 t3.8 91.6 535.4 41.2 (ECxc.Taxe- Duties) Taxes1 Duties 0.0 - 20.6 -- 53.8 -- 18.7 -- 93.0 -- 9LO 7.2

TotalFinancing Requrment 0.0 9.0 107.1 Z2.2 319.2 14.9 110.2 2.5 536.8 91.6 6298.4 1.3

91RLRCOOT PROJECT FINRNCING PLRN

85/86 86A17 17/8 8189 TOTRLTOTRL 2 Total ------ILLION (I- USS) Hettax

1i La 0.08 86.58 169.21 62.51 311.33 24.19 S9.S OTHERLOAN 0.00 16.73 109.83 26.12 152.99 11.77 29.6 EUITY/CRSHGEN. 0.00 26.25 95.01 1S.81 157.10 12.0 29.3

TOITLFIN N6REOURD[Nt 0.11 129.56 361.12 131.74 629.4T 1.31 117.1

0/CRARIO 0.00 80.20 77.23 66.31 75.25 0.9

Industry Department October 1985 - 119 -

INDIA - CEMENTINDUSTRY PROJECT ANNEX5-4

TaiLPROJECT EOSTfOR CCI mREREL

19064? 198749 1?498 h19S Total Total Total Total Local Frweip Local Tragp Local Twrp Local Trap Ldcal ForeignCost Cut

BaseCost LandL SiteDevelopme 0.01 0.00 0.1Z O.K 0.18 0.00 L06 0.00 1.10 0.00 .I0 0.3 Civil Units 5.99 0.00 I7.S2 0.0 26.28 0.00 8.76 0.0D 51S90 LOU 58.L0 9.19 Infrastructure .00 0.00 0.00 O.K o.K o.o o.K 0.00 0.00 0.00 -LOO Macidnery&Equ:plent 11.77 635 73.07 27.73 68.72 30.12 2.97 0.09 55.U2 61.30 223.72 17.21 Spares 0.33 0.18 1.72 0.78 1.71 0.90 0.03 .00 3.79 1.66 5.69 L.3 Transporteight 0.00 0.00 0.07 3.16 6.36 3.01 0.0K 0.00 11.43 6.50 20.93 1.61 Erection/Installation0.5t 0.01 3.13 Llt 1.59 1.10 0.21 .00 0.96 0.35 8.81 0.68 Engineering 0.LI 0.00 2.11 0.00 2.38 0.00 .00 0.L0 S.0 0.00 5.00 038 ProjectImnagent 1.05 0.00 2.95 0.00 2.05 (LOD 2.76 0.00 9.50 0.00 9.S0 0.73

TotalBase Cost 23.01 6.56 108.62 32.12 113.07 31.23 11.67 0.10 259.90 73.01 332.91 25.57 PhyipcalContingencie 0.IP 0.18 3.10 1.00 2.15 0. 0.02 03 .00 5.76 2.01 7.77 Q60 PriceContingcies 2.13 0.34 19.27 1.lS 30.01 7.37 5.22 0.03 56.64 11.90 69.L9 5.27

InstalledCost 25.65 7.08 131.00 37.27 195.23 42.13 19.92 0.13 321.00 86.92 108.71 31.11 InterestDur.Constructi 1.27 0.50 9.51 3.60 Z6.68 9.18 1L.31 6.08 56.13 19.36 75.79 5.83

------rinancingRequrenent 26.91 7.50 140.54 1817 171.91 51.61 38.86 6.21 378.23 116.27 484.58 37.27 (exciTaxes I-Outies) TaxesI Duties 0.0 -- 9.90 -- 59.10 -- 0.70 -- 68.70 -- 68.70 5.20

TotalFinancing Requireent 26.91 7.58 150.1 10.07 231.01 51.61 39.57 6.21 116.93106.7 553.20 92.55

CCIIMIDHR CEMT PROJECT FDUCI116 FLR

5S/86 86/87 07/9B 0049 89/90 TOTSLTOTEL T109L Zotal aotal ------IIILLION IS. -----(.LSS) - - ILUSS)O- lettax Inctix

IBMRLOON 0.00 22.97 133.30 136.35 1.10 16.65 291.02 2Z.62 60.7 S3.1 OTHERLORN 0.00 2.32 1.34 53.50 14.63 15.21 74.79 5.75 15.4 13.5 EQlUTYiCRIS601. 0.00 9.21 53.68 91.77 29.79 10.62 118.10 11.18 30.1 33.3

T7TRLFIasEICI REIEIIEm T 0.00 31.19 191.32 281.62 15.77 12.49 553.20 1.55 111.2 100.0

0/ERRTIO 0.0D 73.27 72.28 67.33 35.65 67.33

Industry Department October 1985 - 120 - ANNEX 5-5 INDIA - CEMENT tDUSTRYPROJECT

INO CWS LIUNITEDUHCIESU COIlERSION ROJECT EstiratedTotal Project Cost

1995/86 1986/87 1987/88 1#/85 r.w Total Total Tobl Local foreign Lcal Foreign Local foreign Locl roreign Locl Foreign Cost Cost

LandI SiteOevelopent 09 0.00 O.50 LO 0.0 0.00 0.0 0.08 2.59 L.ao 2.50 0.19 CivilUorks O.W 0.00 12.12 0.0L 36.35 LOU. 0.00 LU 48.47 LOO 1.47 3.73 foundbtions QLO 0.00 1.32 0.00 12.35 0.00 L.U LOU 17.46 0.00 17.26 1.33 flackinerVEquPnent 0.00 0.00 70.38 10.11 156.51 7M.19 26.13 11.23 Z53.02125.$ 378.58 29.12 Wpm0es9 0.09 7.03 2.75 15.65 7.28 2.61 1.12 25.29 11.19 36.41 2.81 Tramprt/OcmFreight 0.00 LOU 6.12 1.21 11.75 L06 2.33 1.23 23.50 13.51 37.03 L285 Erection/Installation LO. 0.00 3.81 0.79 158 2.0? 1.11 0.31 13.93 3.16 16.99 1.31 Engineering/Consutancy 1.41 6.66 1.40 2.22 5.92 L.68 2.96 4.4 1.80 22.20 37.08 2.85 ProjectIbagm nt 0.60 0.00 2.19 0.00 2.10 0.00 1.20 0.00 6.0 0.00 6.O 0.16

TotalBase Cost 5.01 6.66 110.15 S.17 252.81 100.18 36.67 18.33 194.67 175.64 580.31 1.64 PhysicalContingences L.50 0.67 10.58 5.02 23.99 10.05 3.67 1.03 3A.74 17.56 56.31 1.33 PriceContingencies 0.20 105 10.59 2.79 15.59 13.96 10.52 4.24 66.89 21.95 97.83 S76

InstalledCost 5.71 7.3B 131.32 51.98 322.38 121.39 5195 21.10 510.29 211.16 721.15 55.73 InterestDuring Construction 0.14 Q.26 5.27 5.09 23.96 17.05 19.92 11.13 1.110 37.32 85. 2 6.59 financingRequireent 5.88 7.63 136.59 63.07 315.41 112.24 70.78 38.53 558.69 251.18 810.17 62.32 (Excl.Taxes t Duties) QO0 TaxesI Duties O.O -- 38.05 -- 81.58 13.7 - 132.12 - 132.42 10.19

Totalfinancing Requirement 5.88 7.63 171.65 63.07 126.02 112.21 81.5? 38.53 691.11 251.48 95125972.51

INmACOIENTS SNKRIGIIGRR PROJECTrININs PLAN

05/86 86/87 07/88 88/89 TOTRLTOTIL Z Total I Total --- MILLIONRS. ------(M.15) Nettax Inctax

1ORDLOAN 7.38 124.69 308.99 56.48 157.S5 38.27 61.10 52.90 OTHERLUNI 4.18 75.68 119.03 Z2.O ZZL89 16.35 27.30 23.10 EWMTY/CFSHSEN. 1.95 37.31 14124 14.62 224.1S 17.24 27.70 23.90

TOTRLFIaNCING REOIRDUIRO 13.51 237.72 568.Z6 123.10 912.59 12.51 116.30 100.O

DIERRTIO 86.11 84.16 75.25 61.36 76.24

Industry Department Octo%er 1985 - 121 - ANNEX5-6 MIA - CEMENTIDTUSTRY PROJECT

K..C.P. LTD. CEt1ENT UET-DRY CONUERSION PROJECT

TOTLPROJECT COS1FIR KC.P. CORERROI PROJECT

198v5 159/86 1596/87 1957/U Total Totalalw Total Tol Localr Fraugn Local Foreign Local Foeign Locd Foreign Local-F pg Cost Cost

DiseCost LandI Site Deuclopent 0.00 0.00 L LU LU I.E0 LID LUo oL.m LU I.E0 L.oU CivilUorks 0.00 L.00 5.56 0.LU 16.69 0.00 LID L.00 22.25 0.00 Z2.5 1.71 fountions 0.00 0.00 0.I0 I.E 0.I. 0.00 D.00 0.00 G. 00L o O.m .Io Idchinery/Etuidpnt 0.E 0.00 25.76 17.30 70.77 18.1? .00 0.0L 5.53 35.77 132.30 10.18 Spares 0.E 0.00 2.28 0.36 3.5 0.20 0.00 0.00 4.91 1.29 6.10 1.17 Traoor' I Oce. Freight I.E 0.10 0.98 1.E 1.67 1.70 0.00 L.U 5.65 2.78 B.3 0.65 Erection/Instadlation 0.00 0.00 I.52 0.00 6.09 Q.00 .00 0.00 7.60 0.00 7.60 0.5L Engineering/Consultancy 0.00 L.00 0.00 L.W 0.00 0.00 0.00 0.00 L.00 0.00 0.00 0.00 Project °anagement0.3 G.E° I.E° I.E LU I.E°°00 L° L°° LUD° 0.00 0LI

Total BaseCost 0.00 0.0L 35.09 1817 101.71 21.17 .00 L.W 136.83 39.81 176.67 13.59 PhysicalContingencies 0.K 1.00 1.99 0.93 5.71 1.06 .W 0.00 7.73 1.99 9.72 0.75 Price Contingenes 0L0 0.00 1.30 L.32 11.83 1.53 .W 0.W 13.13 1.5 11.90 1.15

Instaled Cost L.W 0.00 38.33 19.92 119.31 23.76 .00 0.00 157.69 13.69 201.37 15.59 Interest DuringCostruction I.E0 0.00 2.10 1.39 10.38 1.11 0.00 0.00 1Z.19 5.0 16.29 1.t1

financingRequirent 0.00 0.00 10.10 Z1.31 129.69 20.17 .OC 0.00 170.17 15.10 219.65 16.90 (Excl.Taxes I Duties) laxesB Duties 0.00 -- 8.73 -- 10.0Z -- .00 -- 19.75 -- 19.75 1.11

Total FinancingRequirement 0.00 0.00 19.21 21.31 139.72 29.17 .00 0.00 13.93 19. 238.1O 11.31

K.C.P.COOT COIUERSIR PROJECT FIRNIMaS PLRN

8A5 85h/6 0C607 89VM ITaT TOTL : Total Total ------IELLIONRS. ------(H1.5U Hettax Inctax

IBIDLOON 1.00 31.W 27.95 .00 50.55 1.53 26.80 21.70 OTHERLORR 0.00 19.82 88.11 .00 107.93 9.30 19.10 15.30 EQUITVCRSH6EN. I.E 19.70 51.82 .0W 71.5Z 5.50 32.60 30.00

TOTRLFIRRRCINIIUIPB1EIIT L.00 70.52 167.08 .00 239.10 18.33 108.5 100.00

04 REIO 0.00 72.28 69.31 76.21 70.30

Industry Department October 1985 - 122 - ANNEX5-7

INDIA - CMENT INDUSTRY PROJECT

Estimated Disbursement Schedule

Board Presentation: 1 4-Jan-86 Loan Signature: 03-reb-86 Effectiveness: 04-Apr-86

In Qtr X in Qtr Cun X Cun

In IORD FY 8 Quarter Ending: 1986 31 March 1986 0.0 0.0 0.0 0.0 30 June 1986 6.5 3.7 6.5 3.2 1987 30 Septenber 1986 3.5 2.0 10.0 5.0 31 Decenber 1986 6.1 3.6 16. 4 8.2 31 March 1987 11.8 6.'! :28.2 11.1 30 June 1987 25.0 11. 3 53.2 Z6.6 1988 30 Septenber 1987 11.1 6.5 61.5 32.3 31 Decenber 198? 21.7 141.1 89.2 11.6 31 March 1988 22.2 12.? 111.4 55.? 30 June 1988 16.4 9.1 127.8 63.9 1989 30 Septenber 1988 7.0 1.0 134.8 67. 4 31 December 198( 19.5 11.1 151.2 77.1 31 March 1989 12.6 7.2 166.8 83.4 30 June 1989 8.8 5.0 175.6 87.8 1990 30 Septenber 1989 2.9 1.7 178.5 t 89.3 31 Decenber 1989 7.6 1.1 186.2 93.1 31 March 1990 3.7 2.1 189.8 91.9 30 June 1990 3.3 1.9 193.1 96.5 1991 30 Septenber 1990 1.7 1.0 191.8 97.1t 31 Decenber 1990 2.1 1.2 196.8 98.1 31 March 1991 0.9 0.5 197.? 98.9 30 June 1991 1.0 0.6 198.8 99.1 1992 30 Septenber 1991 0.?7 O. 199.5 99.7 31 December 1991 0.5 0.3 200.0 100.0

CLOSING DRTE: 30-Jun-92

Industry Department December 1985 ANNEX 6-1 -123 - Page L

INDIA - CEMENT INDUSTRY PROJECT

Main Assumptions Used in the Financial Analysis

1. The main assumptions used in financial projections for all companies are listed below. Detailed assumptions used in the company projections can be found in the Project File.

2. The financial analysis has been carried out in two parts:

(a) The incremental before and after tax financial rate of return of analysis of each conversion subproject; and

(b) the projection of financial performance of each company, including all cement plant operations and non-cement segment operations, with the proposed conversion investments taking place.

3. The main assumptions in the incremental analyses are:

(a) All projections have been carried out in current terms through 1990/91 and in constant terms thereafter.

(b) The levy/non-levy ratio (60% for pre-1982 plants and 40% for post-1982 investments)would remain in effect until 1989/90. As the ratio is now based on actual production, it is assumed that all converted plants would provide 40% of incremental production as levy cement. From 1990/91 onward full cement decontrol i assumed and no levy quota would be required.

(c) Until 1989/90 a minimum of 30% of levy cemenr has been assumed to be provided as Ordinary Portland Cement (OPC).

(d) Production build-up after conversion has been estimated at 70% of capacity in the first year, 80% in the second year, 90% in the third year and 90% from the fourth year onward (with only minor variations - i.e. 65Z, 75% and 85% for Mandhar).

(e) No real increases have been assumed to the levy price of Rs 379/ton (OPC) and Rs 364/ton (PPC) whi.chwas effective as of June 1985. Non-levy prices vary between plants as shown in para 5. The non-levy price has been maintained at existing levels of between Rs 795 (in the Southern plants) and Rs 575 (in the Northern plants) until 1989/90. No real increases have been assumed for these non-levy prices either. From 1990/91 under the assumption of full cement decontrol, all prices (at plant level, not including packing charges) have been maintained at Rs 600 per ton, except as shown in para 5. ANNEX6-1 -124- Page 2

(f) Production costs are based on a detailed evaluation of new material, labor, coal, power and overhead costs provided by individual companies for their existing pl8nts and planned new facilities. Operating costs are assumed to escalate at the same rate as revenues; coal prices have been estimated to increase by 2.5% a year in real terms. Annex 6-2 shows the details by plant before and after conversion.

(g) The post-tax return is calculated following an analysis of the possible tax savings arising from spplication of the 25% investment credit (for investments capitalized by June 30, 1987) and accelerated depreciation rates (i.e., 15% on declining balance WDV method basis). Only the tax consequences of the incremental investment are taken into account (i.e. only the tax shields available as result of the project are taken into account to modify the pre-tax stream of benefits). All other investment consequences are being estimated to occur with and without the particular conversion project. The post-tax return on equity is based on incremental net cash flow to equity holders on the incremental internal cash that is used to finance the incremental investment stream. All the projects are financed with a high proportion of debt and the gearing assures equity holders a high incremental post tax return.

4. The main assumptions in the financiaL projections of company performance are:

(a) Projections are carried out in the 'with- Project case in current terms through 1991/92 when all projects are expected to have attained steady state operations.

(b) Inflation assumptions are based on the following parameters consistent with Bank guidelines:

CY86 CY87 CY88 CY89 CY90 CY91 CY92

Foreign Goods & Services 7.0 7.0 7.5 7.7 7.5 4.5 4.5 Local Goods & Serv'tces 7.0 7.5 7.5 7.5 7.5 5.0 5.0

(c) Detailed working capital requirements for cement plant operations are to be found in the Project File (are shown against individual company projections).

(d) Interest on new long-term debt taken as follows:

Foreign Currency Portion of IBRD Loan - 14.0% Rupee Portion of IBRD Loan - 14.0% Other Loans (weighted average) - 14.0% Debenture issues - 15.0% Short Term Loans (Bank overdraft facilities) - 17.5% ANNEX6-1 -125- Page 3

Repayment of loans in maximum of 14 semi-annual installment starting no more than 2 years after plant commissioning.

(e) No asset revaluations have been assumed to take place.

5. The particular assumptions by plant and company are sumarized below:

Main Assuption a) Clinker Capacity (TPD) & Z Utilization Existing Kilns Z Utilization Existing Converted 1985/86 1987/88 1989/90

1. ACE Madukkarai 1,085 1,480 90 85 90 2. ACE Shahabad 1,440 2,400 85 75 70 3. Birla Satna 1,750 2,250 95 85 80 4. CCI Mandhar 600 1,500 85 80 75 5. ICL Sankarnagar 2,200 3,000 89 96 91 6. KCP Macherla 770 1,200 95 95 91 b) Cement Production ExistnA (j) Converted (Z) 1985/86) (1989/90) OPC/Slag PPC OPC/Slag PPC

1. ACE Madukkarai 20 80 40 40 60 2. ACE Shahabad 45 55 40 60 3. Birla Satna 60 40 60 40 4. CCI Mandhar 100 0 57 a/ 43 5. ICL Sankarnagar 40 60 80 5, 20 6. KCP Macherla 100 0 100 0 a/ limited to 400,000 T Slag/yr, remaining production or 300,000 tpy will be PPC b/ will rise to 100% OPC by 1995 c) Coal & Power Consumption Existing Converted Coal Power Coal Power (Z/ton (kWh/t PPC) (Z7ton) (kWh/t PPC) clinker)

1. ACE Madukkarai 46.0 109 29.0 134 2. ACE Shahabad 44.6 109 22.7 120 3. Birla Satna 34.0 119 21.0 119 4. CCI Mandhar 24.8 100 14.0 104 5. ICL Sankarnagar 27.0 109 16.0 120 6. KCP Macherla 35.0 133 22.0 120 ANNEX6-1 Page 4

- 126 - d) Cement Prices Levy Non-Levy Decontrol OPC PPC (1985/86) (1990/91) All Plants: 379 364

1. ACE Madukkarai 759 700 2. ACE Shahabad 679 630 3. Birla Satna 575 575 4. CCI Mandhar 650 600 5. ICL Sankarnagar 795 650 6. KCP Macherla 650 600 p 6. Working capital assumptions are summarized below and detailed in the Project File Item 6-1 - 6-5.

ACC Plants Cash - 1% of sales Accounts Payable - 5% of sales Raw Materials - 6% of variable cost Stores & Sapres - 25% of variable cost Finished Goods - 3% of variable cost Semi-finished Goods - 1% of variable cost Other Current Assets - 10% of variable cost AccountsPayable - 20% of sales Other Current Liabilities - 5Z of sales

Percentages based on past years' actual figures.

Birla Jute As only a minimal amount of increase is expected in working capital these amounts were added to the FY84/85 figures and escalated by the inflation factor.

CCI Cash - 4% of sales Accounts Receivable - 4% of sales Stores & Sapres - 101 weeks/cost (actual cost ~ by 52 times the number of weeks) Packing Material - 8 weeks/cost (actual cost - by 52 times the number of weeks) Raw Material - 21 weeks/cost (actual cost - by 52 times the number of weeks) Semi-finished Goods - 3 weeks/sale (actual sales - by 52 times the number of weeks) Finished Goods - 1 week/sales (actual sales - by 52 times the number of weeks) Other Current Assets - 17% sales Acounts Payable - 8% cost of goods sold Advance from Customers - 10% sales Other Current Liabilities - 10% sales ANNEX6-1

-127- Page 5

India Cements Current Assets Minimum Cash - Rs 0.5 million Accounts Receivable - 3.0% of sale Inventories Raw Materials - 1.3Z of variable cost Packing Material - 0.8% of variable cost p Fuel - 5.0Z of variable cost Stores & Spares - keep level in real terms Unfinished Goods - 2.5Z of variable cost Finished Goods - 1.0%of sale

Other Current Assets - keep constant at present level Current Liabilities Accounts Payable - 3.0 of cost of goods sold Customer's Advances - 5.0Z of sale Trade Deposits - 2.5% of sale Other Current liabilities - 15.0% of cost goods sold

KCP Current Assets Cash & Bank - Constant 85 level/con. term Receivables (incl. Doubtfuls 11.0% of sales Inventories - 38.0% of sale Loans & Advances - Keep constant/currentterms Other Current Assets - Keep constant/constantterms

Current Liabilities Payables - 21.0% of sales Advances Received against Sales- 20.0% of sales Other Current Liabilities - Keep constant in 85 constant value

7. Interest and debt repayment schedules are also in the Project Files (Items 6-1 - 6-5). The consolidated projections of each company's financial statements are based on details received from the companies and reviewed by the appraisal mission. They are also to found in the Project Files. Items 6-1 - 6-5.

Industry Department October 1985 - 128 -

INDIA - CEMENTINDUSTRY PROJECT ANNEX6-2 IIIIIwm nWS PUEn aer "WIavs Bymm (INC3T1f 1985Rs.) MK silom sOriAsn~ mmmm ao mm VET f UET oW ET Orfo S ORY VET W UET Y ET rYW

RverageSales llisatimnfToi 543.1 9.5 99.0 5.0 17.1 502.0 477.1 S02.0 27.4 561.5 479.4505.5 500.759.9 (excipacking) (All PC) &ea SalesRadisationTon 5380 580.0 493.6 524.5472.0 m97.5177.1 599.0s52 560.0174.0 SO.0 19.2 526.8 (exclpacking) (lWC I DC) DecutrolPrice (eci padcking)700.0 700.063L0 630.0600.0 60.0 600.0 600.0 650.0650.0 600.0 608.0630.0 630.0

PackingChrge 113.0113.3 1130 113.0 113.0113.0 1l10O13.0 113.0113.0 113.0113.0 1l3.0 113.0 VariableCosts (OPC) LiUestone 69.2 6t.7 21.6 17.9 32.2 32.2 31.1 34.1 75.6 60.2 S1.3 11.3 10.6 36.7 -9.6Z Additives 2.6 2.6 5.9 4.7 3.6 3.6 3.7 3. 6.7 D.0 5.2 5.2 1.1 3.5 -13.61 6ypsm(+51mg) 6.0 6.0 13.6 13.6 15.1 15.1 85.2 85.2 7.5 7.5 7.1 7.1 17.3 21.9 26.31 Pmage 8B.3108.5 103.6114.0 75.0 71.9 69.0 71.8 80.7 88.8 91.8 92.8 70.3 79.7 13.1 Coal 239.9 153.3194.2 98.8115.3 71.2 50.1 28.2 183.1106.9 157.5 99.0131.9 75.1 -10.02 Liiite 0.0 0.0 0.0 0.0 0.0 0.0 0L. 0.0 38.9 24.7 0.0 0.0 8.9 5.2 -4222 Stores. Spares 52.0 17.4 75.5 35.0 47.9 27.1 27.6 24.0 45.3 36.6 34.0 25.0 10.7 28.8 -29.32 PackingCost 131.0131.0 131.0 131.0138.0 138.0 131.0 138.0 13.0 131.0 138.0138.0 114.1121.1 5.9S

TotalViable Cost(OPC) 599.0513.6 519.3115.0 427.0362.0 407.6381.8 5758 166.6 175.139B.6 428.3 376.0 -12.22 VariableCas (PPC) iutstone 62.1 58.1 18.9 15.7 Z8.9 28.B 0.0 31.1 652 51.9 0.0 0.0 45.3 37.0 -18.3Z Additives 2.4 2 .45.1 1 3.0 3.0 0.0 3.7 6.3 3.8 0.0 0.0 4.S 3.5 -23.02 6ypsa S.4 5.1 13.6 13.6 15.1 15.1 0.0 9.7 7.5 7.5 0.0 0.0 10.1 10.4 -0.62 Pozolun 4.3 4.3 13.5 13.5 LO 0.8 0.0 10.4 12.9 12.9 0.0 0.0 10.5 10.6 1.22 PO 883 108.51036 111.0 70.3 69.6 0.0 78.0 75.5 82.9 0.0 0.0 81.9 89.0 8.7 Coal 226.1111.5 148.7 75.7 102.6 63.t 0.0 50.1 117.7 96.2 0.0 8O 1SB.5 79.5 -6.5Z Lignite 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 31.4 19.9 0.0 0.0 11.2 5.2 -3.61 Storesa Spares 52. t47?. 79.5 35.0 3.9 26.6 0.0 21.0 0.0 3Z? 0.0 0.0 i-.1 32.0 -37.31 PackingCst 131.0 131.0131.0 131.0 138.0138.0 0.0 138.01310 138.0 0.0 LO 135.S135.7 0.2Z

TotalValable Cost (IPC) 571.5501.5 513.8102.5 110. 353.2 0.0 317.8 52S.5435.8 0.0 0.0 498.9102.8 -19.32

TotalVriable Cost OPC 599.0513.6 59.3 41S5.0427. 362.0 407.6381.8 575.8 166.6 475.13I .6 :'8.3 376.0 -12.2Z Tobl VariableCost PPC 571.5S01.5513.8 102.5 410. 353.2 0.0 347.8 SZt.5435.8 0.0 0.0 198.9102.8 -19.3Z TotalFixed CotTMm 134.9 18.2 103.8 539 50.6 1.1 tO5. i1.7 113.7 73.3 65.1 '1.8 1.5 52.3 -3.12 TotalUei#ed CoTan 713.14606.6 631.8 461.4!68.0 39.1 512.6 4N11.7sSe 52B.5540.2 410 3 1%.0 42D.3-15.31 Oqreciatim 19.3 45.6 15. 60.9 2.2 1C.5 3 35.4 37.3 54.5 39.2 . 23.1 i3.7 0?.2Z FincidalChrges 19.3 54.0 15.6 95. ' .2 50.1 9. 15.323.5 Z .s 24.6 31.1 11.5 58.1 300.5S

TotalCost/Ton 752.1706.2 663.' 617.6iO8.S 515.0 542.0 195.47'9.6 656.6 604.8518.4 533.9SZ2.2 -2.22 rss frgiTon -2.1 116.t 4.6 21%.114?.0 242.4 107.6 227.3 6.2 175.5 76.8 212.7 143.2249.5 71.32 Cash6knUatiT -51.7 62. -10.8110.7 135.8 171.0 98.7182.1 -17.3 101.0 52.2 l68.i 128.6 1t.1 418.82 NetProfit/Ton -71.0 16.8 -21.5 1t.9 106g. ;27-5 78.1 116.6 -5;.6 46.4 13.0 121.6 105.3147.6 4022

Industry Department October 1985 - 19- ANNME 6-3 Page 1

INDIA - CEMENTINDUSTRY PROJECT The Rssociated Cenent Coripanies Linited

Summarized Historical Financial Statenents ------(Millions of Rs..) 1980/81 1981/82 1982/83 1983/84 1984/85 Income Statement

Capacity (Mill. Tons) 7.5 7.5 8.0 8.8 9.4 Production (fMill.Tons) 5.9 6.2 6.5 7.2 7.3 Utilization Rate(C) 792 832 81X 83X 78Z

Sales 2,091.9 2,603.5 3,814.3 13602.0 4,837.0 Net Profit(Loss) 19.6 316.7 402.0 212.0 127.0

Met ProfitCX of Sales) 0.92 8_9X 8.02 3.5X 2.6X Debt Seruice Couerage 1.3 2.1 3.6 2.0 1.5

Balance Sheet

Current Rssets 1,012.1 1,194.6 13421.4 1,905.1 2,035.6 Inuestnents 90.4 97.3 99.2 110.5 111.9 Fixed Rssets 1,374.2 2,070.5 2,645.7 3,011.9 3,108.0

Total Assets 2,476.6 3,362.1 4,166.3 5,060.5 5,255.5

Current Liabilities 951.3 1,207.8 1.431.9 1,555.4 1,707.3 Long tern Debt 1,002.9 1,315.4 1,547.1 2,238.7 2,221.3 Equity 522.4 839.2 1,187.4 1,266.5 1.326.9

Total Liabtilities 2,476.6 3,362.4 4,166.3 5,060.5 5,255.5 =s======-==== S== =5==s Current Ratio 1.4 1.6 1.6 2.0 1.9 Debt/Equity Ratio 66.34 61.39 57.13 64.36 61.39 -130- ANNEXf-3 Page 2

RSSOCIRTED CEMENT COMPRNIES LIMITED PROJECTED PROFIT B LOSS STRTEMENT (In Mlillions Of Rs..)

WV85 85/86 M6/7 87188 88489 89/90 9091 91/92 3293 93/4 9/95

mnatPreuction 1ill,lon 7.33 0.12 9.01 9.03 9.36 9.38 9.53 9.61 9.61 9.61 9.61 enrageRtention Price 176 482 t81 t81 t82 188 610 610 610 610 610 (C.ttnt 1385Ri/Ton) TetalSales 1,837.15.179.0 6,305.6 6,771.1 7,563.3 8.23o.210,579.1 11,191.811326.8 11,126.8 11,126.8 otalUariable Cost 3,270.13.910.t 1,552.1t,917.0 5,1.1 5,963.66,497.9 6,962.17,193.2 7,281.5 7,372.0 TotalFixed Cost 887.0 923.7 1,005.1 1,096.71,191.1 1,223.2 1,10Z.2 1.1.9 1,519.6 1,573.71,598.5 Changein Inventories (27.3) 180.1 111.0 119.0 136.7 150.2 130.5 65.0 21.0 25.t

OperatingProfit 680.0 617.6 928.5 838.8 1,038.11,180.1 2,029.2 2,868.32,719.0 2,596. 2.181.8

OtherInc.e (net) 118.8 115.2 125.6 132.8 It2.8 153.5 162.8 178.9 171.5 174.5 174.5 Finani Charges 354.0 219.3 2%.? 261.7 261.7 210.2 197.1 1%.1 128.9 128.6 126.1 FinancialCharges for Project 0.0 0.0 0.0 0.0 125.8 163.9 158.0 141.2 117.6 93.9 70.3 Depreciation 317.0 319.0 399.8 14O.6 163.4 189.7 511.0 527.8 515.6 561.1 582.5 hortization 0.0 2.9 2.9 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Profitbefore Tax 127.0 131.6 102.6 266.5 330.0 t39.9 2,125.6 2,221.22,131.1 1,981.2 1,875.2

IncmeTax 0.0 20.1 128.5 71.3 52.0 69.3 971.9 1,111.t 1,059.5 980.1 92Z.9

NetProfit 127.0 110.9 271.2 195.2 278.0 370.6 1.153.8 1,112.B1,072.0 1 ,001.1 952.1 Dividens 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5

RetainedEarnings 60.5 11.5 207.7 128.7 211.6 301.1 1,087.3 1.0j.3 1.005.5 937.7 805.9

Raties OperatingProfit RsI OfSales 11.11 11.3X 11.7X 12.1% 13.?X 11.3I 26.7S 25.6X 21.12 22.71 21.7Z NetProfit 1sI OfSales 2.6S 2.01 1.31 2.9X 3.1 1.5X 10.9X 9.9% 9.1X 8.8 &.31 - 131 - ANEXM 6-3 Page 3

RSSOCIRTED CEMENT COMPRNIES LIMITED PROJECTED STATEIEKT OF SOURCE AND APPLICRTION OF FUNDS (In illlions Of Rs.)

5/86 06/V 07P/S 88/89 89/90 90/90 91/92 9293 93/91 9/95

50UCE NetProfil After Tax 110.9 274.2 195.2 278.0 370.61,153.8 1,112.81,072.0 1,04.1 952.4 Depreciation 319.0 399.8 110.6 163.4 489.7 511.0 5z7.8 5t5.5 561.1 582.5 Rrortization 2.9 2.9 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 InterestCharges 219.3 21.7 Z61.7 307.5 101.1 355.1 287.3 216.5 ZZ.7 198.6 OtherNon Cash Charges 31.9 36.6 11.7 t7.6 S'.1 56.5 0.0 0.0 0.0 0.0

TotalInternal Generation 7f1.0 960.2 912.0 1,176.51,318.0 2,076.6 1,927.91,864.1 1,790.9 1,733.4 ExternlSources ProjectLoan 16i.0 651.0 375.2 91.7 0.0 0.0 0.0 0.0 8.0 0.0 OtherLoans 283.1 11.9 72.5 51.9 27.9 59.2 0.0 0.0 0.0 8.0 ShortTern Loans/Overdrafts 0.0 203.5 311.3 0.1 .0 0.0 .D O.0 0.0 0.0 Equity/SubordinatedDebt 0.8 0.0 0.0 0.8 0.0 0.0 0.0 0.0 8.0 0.0 Increasein Stockids Deposits 10.0 0.0 0.0 0.0 0.0 0.0 0.0 8.0 0.8 0.0

TotalExternal Sources 379.4 902.1 759.0 113.6 27.9 55.2 1O0 0.0 0.0 0.0

TOTRLSOURCES 1,123.11,862.7 1,701.0 1,320.1 1,316.7 2,135.0 1,927.91,864.1 1,790.9 1,733.1

t 3= 2 =33=3a -r3=3= r= 3= - l=h r.G rs _= AUCRTION NornulRdditiorn 161.2 536.3 522.6 518.9 671.3 Sl.7 12Z.9 153.7 169.5 169.5 ProjectInuestents 10S.2 758.3 515.9 62.3 0.0 0.0 0.0 0.8 O.0 8.8 OtherProject Inuestmnts 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 InterestOn Other Loans 219.3 216.7 261.7 261.7 210.2 197.1 116.1 128.9 128.9 128.1 InterestOn Project ebt 8 0.8 0.0 125.8 163.9 158.0 141.2 117.6 93.9 70.3 Repagrentof Short Tern Loans 0.8 8.0 0.8 2.5 2.0 33t.6 175.7 .0 0.0 0.0 Re"-tionof Debentures 0.0 0.0 0.0 0.0 °.0 859.3 0.0 0.0 0.0 8.0 RepanentOfExisting Debt 266.5 272.8 271.1 225.1 117.5 129.7 21.7 0.9 0.9 5.3 RepaynentOfProject Oebt 0.0 0.0 0.0 0.0 0.0 111.2 173.9 173.9 173.9 173.9 Dividends 66.5 66.5 66.5 65.5 66.5 66.5 66.5 66.5 66.5 66.5 ChangeIn U.C (189.8) 83.6 60.1 47.3 55.1 (262.5) 56.9 43.3 34.2 35.1

TOTRLRPPUCRTIIONS 1,01l.8 1,961.31,701.0 1,320.1 1,315.7 2,135.8 1,213.9 981.7 967.8 91.9

_= 3=fl =- 03=3= 33= 33= fl 33=3e 33=03 3=3 Inc(Dec) in Cash/Dankhianes 81.6 (101.6) D.8 0.0 0.0 .0 711.0 879.1 823.1 7m.5 RculatedCash 131.6 30.0 30.0 30.0 30.0 30.0 741.0 1,623.32,116.1 3,231.0 DebtService Coverage Tines 1.1 1.8 1,8 1.9 2.1 1.1 1.0 1.1 1.5 1.6 - - ~~~~'32- ANN 6-3 RSSOCIATEDCEWENT COIPRHIES LIhITED Page 4 PROJECTEDPRarOIrnnR BRLRNCESHEET (In Millions Of Rs..) PA5 85/96!? 9/U NAM95890 5051 91/92 912/3 93/N 91A5

-ISSETS CurentDuets cash 50.0 131.6 30.0 38.0 30.0 30.0 30.0 711.1 1,623.32.,16.4 3.231.0 AccountsReceiable 305.0 273.9 315.3 338.6 378.2 tl1.5 520.1 559.7 571.3 571.3 M71.3 Ientories PMlhterial 109.2 237.0 275.9 255.9 331.9 361.1 393.1 121.9 135.9 11.3 116.7 StoresI Spares 754.9 703.9 819.1 890.5 985.9 1,073.1 1.169.6 1.253.2 13591.8 1,310.7 1,327.0 FinishedSeods 79.9 114.6 133.1 111.9 160.5 I71.7 190.4 201.0 Z10.9 213.3 Z16.0 Smi-finise 6oods 112.7 13.8 51.0 55. 61.3 66.8 72.9 78.0 0.6 91.6 82.6

TotalInmetories 1,126.51,099.2 1.Z75.6 1,39056 1.539.61.676.1 ',826.6 1.957.0 2,022.0 2.016.8 2,I72.3 OtherCrentt ssets 551.1 418.0 196.6 528.9 S5.5 637.5 651.6 74i.2 769.0 778.1 710.1

TotalCurrnt ssets 2,035.6 1.9Z2.8 2,111.5 2,285.0 Z.533.32.755.1 3.008.2 1,005.0 4,59.6 5.813.0 6.662.6 Other%ssets lnei nts 103.2 103.2 103.2 103.2 103.2 103.2 103.2 103.2 183.2 103.2 103.2 hferred Expeniture 9.7 5.0 2.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

6rm FixedRswts 1,075.5 5,200.26,172.2 7,339.7 8,1N9.58.77t.8 9,381.3 9.,66.510,307.8 10,769.1 11,239.0 LessAcculated Dereciatimn 1.767.5 2.116.5 2.516.3 2.956.9 3.120.2 3.91.9 4,120.9 t.5?8.7 5,54.1 6,058.1 6.615.9

etFixed Alsets 3.108.03.083.7 3,655.9 ,391.9 1,728.3 1.86.9 1,960.3 1.917.8 4.813.5 1,711.0 1,598.1 CapitalUark In Progress 321.7 647.3 519.2 290.6 335.6 270.8 21t.1 226.8 23t.9 234.8

TotaFixed Assets 3,109.03,t09.3 1,303.21,901.1 5.018.95.200.5 5,231.2 5,132.25,0t.3 1,9t5.9 4,832.9

T09RLRSS£TS 5,255.55,410.2 6.520.8 7,292.37,655.1 1.059.1 9,111.5 5,211.110,129.1 10,E92.0 11,598.7

LIMIUTILSI EQITY CurrentLiabilitie countcsPayable 1,312.7 1,095.8 1,261.1 1,354.3 1.512.7 1,616.0 2.115.8 2.239.0 Z.285.4Z,285.4 Z295.1 OthirCtrent Liabilities 61.6 273.9 518.7 853.1 890.5 921.9 7D.7 551.7 571.3 571.3 571.3 lividendsPayable 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 66.5 CurentIbturity Of LTD 266.5 Z72.8 Z71.1 235.1 117.5 240.9 198.6 371.8 171.9 179.2 179.2

TotalCurrent Liabilities 1.707.3 1,709.0 2.120.7 2.509.2 2,617.1 2,905.2 3,095.6 3,010.0 3,098.0 3,102.1 3.102.4

LangTent Det(Net) 2,105.6 2,202.2 2,626.8 2,839.1 2.835.1 2.622.1 1,923.0 1,718.2 1,573.4 1,354.Z .Z1S.0 OtherLong Tern Liabilities 115.7 157.6 194.2 235.5 293.5 337.9 95.1 95.1 55.I 95.1 95.1

Sare Holdersunds Sare Capital 332.3 332.3 33Z.3 B32.3 332.3 332.3 332.3 332.3 332.3 332.3 332.3 EWity/SubordinatedDebt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 tainedEarning 9.6 1,039.1 1,246.8 1.375.5 1,597.1 1 .891.22,978.5 4,021.9 5,030.4 5.696.0 6,953.9

TotalSare Holders funds 1,326.9 1,371.4 1,57.1 1,707.8 1,919.4 Z,Z23.53,310.9 1,357.2 5,362.7 6,300.3 7,186.2

TOILUIU T5TISI EQUITY 5.ZS5.5 S,10.2 6.520.9 7,292.3 7,655.1 9,059.1 8,111.6 9.Z0.5 10.129.210.92.0 11.598.7

Ratios CErentRItio 1.94 1.66 1.42 1.25 1.36 1.31 1.52 2.09 2.55 2.98 3.40 ebt/uity 61.39 62.38 62.3B 62.30 691.10 54.6 37.63 '9.71 23.11 119.2 11.96 Indust ry Departmnnt October 1985 - 133 - ANNEX6-4 Page 1

INDIA - CEMENTINDUSTRY PROJECT

Birla Jute 8I Industries Linited ______Sunnarized Historical Financial Statenents ------(Millions of Rs.) 180O81 1981/82 1982/83 1983184 1984/85 Incone Statenent ------______Capacity (Mill. Tons) 1.8 1.8 2.4 2.4 2.4 Production (Mill.Tons) 1.2 1.2 1.8 1.9 1.9 Utilization Rate(l) 69X 69X 75X 79X 79X

Sales 967.6 1.035.3 1,128.5 1,207.5 1,267.9 Net Profit(Loss) 32.3 12.2 173.5 132.4 11.8

Net Profit(X of Sales) 3.2X 1.1X 10.1X 5.7Z 6.5X Debt Seruice Couerage 5.0 0.6 3.7 2.2 2.0

Balance Sheet

Current Assets 446.9 407.9 568.2 653.6 981.5 Inuestnents 24.1 24.2 23.6 23.6 24.4 Fixed assets 295.6 497.2 998.9 1,102.5 1,861.6

Total Rssets 766.6 929.3 1590.8 1,779.7 2,867.5

Current Liabilities 228.2 277.5 411.6 466.9 556.4 Long tern Oebt' 211.7 317.8 299.4 338.5 630.0 Equity 326.7 334.0 ,879.7 971.3 1,681.1

Total Liabilities 766.6 929.3 1,590.8 1,779.7 2,867.5 ======n======Ratios Current Ratio 2.0 1.5 1.4 1.4 1.8 Debt/Equity Ratio 39.61 49.51 25.75 26.74 27.73 - 134 - ANEX-64 Page 2

BIRLR JUTE a INDUSTRIES LIMITEZ PRWOECTEDPROFIT IL LOSS STRTEMlENTUT TH PROJECT CIn Millions Of Current Rs.> v/i5 95/6 86/v 97/9999/959 89AO 90i 911/252923 3/51 5/95

(Gctual).. forecst. Cat SaleQolue (million ton) 1.90 1.96 2.30 2.11 2.51 2.63 2.71 2.71 2.71 2.71 2.71 WagePrice ( Constant195 s/ton) 183 469 77 475 177 178 593 593 593 593 B97

NetSale 1,267.51,237.3 1,554.5 1,716.7 1,95.8 2,210.92,850.8 2,593.1 2,993.1 2,993.1 2,993.1 briableProduction Cost 798.5 775.1 970.21.10LI 1,212.2 1,351.71,197.3 1,531.9 1,599.9 1,599.1 1,U68.5 fixedProduction Cost 117.1 129.9 176.1 189.3 Z00.9 215.9 230.8 212.3212.3 242.3 212.3 changein inuentwry (0.5) (23.5) (81) (43.3) (46.5) (50.0) (49.3) (38.3)0.0 0.0 0.0

Iros Profit 352.6 355.6 456.3 510.6 62Z.2 692.41,172.1 1,2085 1,161.21,152.0 1,1t2.5

OtherInc osues 1/ (126.2) 23.3 21.5 26.1 29.1 30.5 32.6 34.2 31.2 31.2 34.2

OeatingProfit 266.4 370.9 490.9537.0 6.6 722.9 1,21M.?1,242.7 1,155.4 1.16.2 1,176.7 Depecatio 117.0 113.6 139.0 157.2 185.5 209.7 221.2 236.6 249.5266.2 292.6 bortization 0.0 0.0 0.0 0.0 10.0 10.0 10.3 10.0 10.0 10.0 ProjectIntwest 0.0 0.0 0.0 L0 29.1 64.9 62.6 56.0 487 39.1 30.1 InterestoP Existing Debt 61: 99.6 09.1 79.2 69.0 60.1 47.8 13.5 10.1 6.7 3.4

Inc.. BeforeTax 88.0 165.6 252.4 300.5 366.3 378.2 860.0 52t.7 876.7 863.8 959.6 less inclU tax 6.0 :8.7 27.1 601I 119.6 132.1 379.6 417.7 413.1 40.5 410.4

NetIncoe 92. 146.9 225.3 240.1 246.7 216.1 438.4 587.0 163.6 155.3 410.Z Dividends 16.0 16.0 19.0 16.0 18.0 18.0 18.0 18.C 18.0 18.0 19.9

RdeainedEarnings 66.0 130.9 207.3 222.1 229.7 2Z.1 162.4 489.0 44S.6 437.3 122.2 Patos OperatingProfit s I OfSales 21.0130.6Z 30.91 30.61 32.71 32.71 2.31 41.5?39.95 39.6? 39.31 ilA profit IsS OfSales 6.5? 11.5 1i.5t 13.7n 12.11 11.12 16.95 16.91 15.51 15.21 11.71

I/Net incloss fre otheroperations -135 - AMEX6-& Page 3

BIRLR JUTE & INDUSTRIES LIMITED PROJECTED FUNDS FLOU STRTEMENT UITH PROJECT (In Millions Of Current Rs.> 05/96B6/B7 97/99 9/B9 99A0 90fll 9142 92/9393/94 5495

(Est.) .Forecast.

W0E

NetIncwn after Interest £ Tax 116.9 2Th3 240.1 246.7 2K.1 480.1 507.0 463.6 45.3 440.2 ortization (LO 0.0 0.0 0.9 I. 10.0 10.0 10.0 10.0 18.0 Depreciation 113.6 139.0 157.2 195.9 209.7 221.2 236.6 249.9 266.2 292.6 Intest Charges 99.6 89.4 71.2 98.4 125.0 11i. 71.5 53.8 6.2 33.5

Internalfwd 6eneration 360.2 453.8 176.6 531.0 590.9 851 850 792.3 M.7 766.3

ExternalSotrces IBRDLoan 0.0 86.6 169.2 62.5 0.0 0.0 0.0 LO 0.0 0.0 InstitutioalLoans 0.0 16.7 109.9 26.1 0.0 0.0 0.0 0.0 0.0 9.0 Short-termBorrings 195.0 0.0 0.0 0.0 0.0 0.0 0.0 LO 0.0 0.0 CrnurtibleDebenture Issue 10.0 0.0 0.0 0.0 LI 0.0 0 0 LI LI 0.0 Han-CwoertibleDebenture Issue 0.0 0.0 0.0 0.0 0.0 0.0 0.0 °L° 0.0 0.0

TotalDebt financing 195.0 103.3 279.1 98.9 0.0 0.0 C0 0.0 0.0 0.0 Eqity Issues 0.0 0.0 LO 0.0 0.0 0. 010 LO 0.0 0.0

Toal ExternalSowces 195.0 tO3.3 219.1 88.9 0.0 (LO 0.0 0. 0.0 0.0

TotalSurces 555.2 557.1 755.7 619.9 590.9 825.1 825.0 782.3 m.7 766.3

IFIUCITION

ID apitalised 7.2 33.5 29.1 1Mal CapitalInuents 417.0 166.9 9OLD150.9 2000 200.0 110 225.0 225.0 225.0 ProjectCapital Tnuestet 0.0 122.4 330.6 105.3 0.0 0.0 0.0 0.0 0.0 0.0 qwpentof ProjectDebt 0.9 0.0 0.0 8.O 0.0 L0 33.7 67.3 67.3 67.3 Repapientof Existinglos 36.2 ".7 76.3 76.4 76.5 67.0 85.7 231.6 25.0 25.0 Interest (project) 0.0 0.0 0.0 29.4 61.9 62.6 5.0 48.7 39.f 3A1 Interestother 99.6 99.4 79.2 69.0 60.1 17.9 13.5 10.1 6.7 3.4 Cagein UCercludingcash) (61.2) 23.7 30.L 32.7 35.1 31.6 26.9 9.0 0.0 0O DividendsPaid 16.0 18.0 18.0 18.0 18.0 19.0 18.0 19.0 19.0 19.0

TotalRpplication of fuinds 507.7 171.4 618.0 510.2 14.6 430.1 375.9 600.7 391.5 369.9

Rcciuatedash 17.5 133.3 210.9 350.6 186.7 881.71,330.9 1,512.5 1,908.7 2,30L2

DebtSevice Coverage Tins 2.7 3.4 3.1 3.0 2.9 1.6 1.3 2.2 5.6 6.1 - 136 - ANNEX6-4 Page 4

BIRLR JUTE & INDUSTRIES LIMITED PROJECTED BRLRNCE SHEET UITH PROJECT (In Millions Of Current Rs.) WEve 85/e6 86/87 87/88 88/89 99/9090/91 91/92 92/33 93/" 9/95

(Rctual).. Forecast. RSSETS CurrentAssets Cash 11.9 47.5 133.3 240.9 350.6 406.7 981.71.330.9 1,512.5 1,90B.1 2,306.2 AccontReceivable 110.0 166.0 181.1 194.7 209.3 225.0 240.5 252.5 22.5 252.5 252.5 Inuentories 505.6 529.1 577.2 620.5 667.0 717.0 766.3 804.6 804.6 804.6 904.6 OtherCurrent Assets 264.0 238.1 250.9 269.7 290.0 311.7 333.1 349.8 349.9 349.8 349.8

TotalCurrent Rssets 981.5 980.81,12.5 1,325.81,516.9 1,710.52,221.7 2,737.9 2,919.5 3,31S.7 3,713.2 Investnents 24.1 24.4 21.4 24.4 24.4 24.4 24.4 24.4 24.4 24.1 71.4 FixedAssets Plant6ross Value 2,533.4 3,066.03,232.0 3,566.6 4.020.3 4,220.34,420.3 4,560.3 1.75.3 5,010.3 S 235.3 less accumulateddepreciation 787.1 991.0 1,220.11,167.3 1,713.2 2,012.92,357.1 2,683.7 3,023.6 3,379.9 3,752.4 iet PlantValue 1,746.0Z,D75.0 2,011.9 2.099.3 2,277.1 2,177.42,063.2 1,876.6 1,761.7 1,630.5 1,182.9 ilrk in Progress 115.6 0.0 122.4 199.4 0.0 9.0 0.0 0.0 0.0 0.0 0.0 lDCCapitalized 7.2 10.7 70.1 60.1 50.0 40.0 30.0 20.0 10.0

IOTRLRSSES 2,867.53,080.1 i,308.1 3,688.63,888.5 1,0l02.1,359.3 4,678.94,735.6 4,990.6 5,230.5

URBIUTIESI EQUITY CurrentLiabilities AccoastsPayable 464.3 485.9 530.1 569.8 612.6 659.5 703.8 739.0 739.0 739.0 739.0 ProuisionFar Dividends 16.0 16.0 18.0 10.0 18.0 18.0 18.0 18.0 18.0 18.0 10.0 OtherCurrent Liabilities 76.1 67.5 73.6 79.2 95.1 91.5 97.9 102.6 102.6 12.6 102.6

CurrentLiabilities (excl.c.n) 556.4 569.4 621.7 667.0 715.7 76B.0 819.5 859.6 959.6 859.6 859.6 Currentllatrity of LTD 36.2 41.7 76.3 76.4 76.5 67.0 119.4 298.9 92.3 92.3 92.3 NetLong trn Debt 593.7 711.0 771.0 973.7 986.1 919.1 199.7 500.8 409.5 316.1 223.8 ShareCapital 87.0 97.0 97.0 87.0 87.0 87.0 97.0 97.0 87.0 87.0 87.0 ReservesI Retained Earnings 1,594.21,635.1 1,752.4 1,894.5 2,023.2 2,161.32,533.7 2,532.7 3,20B.3 3,635.6 3,967.8

TOTRLLIfLUTIES 3 ECITY 2,867.53,080.1 3,308.4 3,688.6 3,808.5 4,002.44,359.3 4,678.9 4,735.6 4,990.6 6,230.5

Ratios CurrentRatio 1.7 1.6 1.6 1.8 1.9 2.1 2.4 2.4 3.1 3.5 3.90 Debt/Equity 26.74 30.70 30.70 33.67 32.68 29.71 23.77 14.86 11.99 8.92 S.95

Industry Department October 1985 ANNEX6-5 - 137 - Page 1

INDIA - CEMENT INDUSTRY PROJECT

Cenent Corporation Of India

Sunnarized Historical Financial Statenents ------CMillions Of Rs.) 1980/81 1981/82 1982/83 1983/84 1984/85 Income Statenent…… -…

Capacity CMill.Tons) 0198 1.95 2.22 2.22 2.62 Production (lMill-Tons) 0.79 1.25 2.00 2.00 1.94 Utilization Rate (1) 80X 861 96X 90X 80X

Sales 277.7 534.9 1,107.4 1,123.3 1,292.0 Net Profit(loss) 3.9 88.2 248.7 74.9 9.1

Net Profit

Balance Sheet

Current Rssets 381.9 62l.39 929.6 1,048.5 1,142.6 Investnents 0.0 0.0 25.0 Z5.1 25.1 Fixed Assets 1,601.1 1,717.8 1,930. 2,249.2 3,164.7

Total Rssets 1,986.0 2,371.7 2,884.8 3,322.8 4,332.1

Current Liabilities 18418 370.9 498.7 605.7 823.3 Long Tern Debt 841.8 814.2 760.6 963.4 1,588.0 Equity 956.4 1 ,186 6 1,625.S 1,753.7 1,921.1

Total Liabilities 1,996.0 2,371.7 2,884.8 3,322.8 4,332.4

Ratios Current Ratio 3.1 2.5 2.7 2.5 2.0 Debt/Equity Ratio 47.53 41.59 32.68 35.65 45.55 - 138 - A?.IE (-5 Page 2

CEMIENT COPPORRTION Of INDIR PROJECTED PRO'FIT aI LOSS STRTEMENT UITH PROJECT (IRnMillions Of Current Rs.) 84/8S95/6 86/87 svu 88/89 89/90 90/i 911/9292/93 93191 v915

(Est.)...... recast CoIentSale Ulume (nill/tons) 1.9t 2.29 2.71 3.65 4.05 4.62 t.98 5.09 5.10 5.11 5.11 AvePagePrice(19851s/ton) 493 527 527 525 527 52; 555 599 55 599 599

NetSale 1,252.01,602.9 Z.W4.5 Z,875.5 3,423.6 t,191.1 5,353.3 5,713.4 5,752.9 5,168.1 5,768.4 UariableProductim Cost 862.0 993.91,29.9 1,7ZS.SZ,056.9 2,t98.0 Z,887.83,101.5 3,126.7 3,151.8 3,171.1 FixedProduction Cost Z79.9 305.9 357.6 463.6 536.9 612.3 723.6 765.7 766.? 768.4 768.4 Dereciation 10B.3 237.1 319.3 332.5 350.8 502.1 66Z.2 697.0 733.7 7.3 813.0 changein inventory 15.0 (3.6) 161.3 295.5 294.8 25Z.3 326.A 145.9 19.1 19.6 17.t

OperatingProfit S6.8 62.4 279.0 619.3 * 774.5 931.21,106.1 1,322.1 1,143.9 1,095.1 1,033.3 OtherIncw:e (Net) 18.6 19.5 21.2 21.9 31.1 42.5 61.6 93.6 112.3 216.1 329.1 Plurtization 0.0 16.6 16.6 16.6 16.6 16.6 0.0 0.0 LO 10 0.0 ProjectInterest 0.0 0.0 0.0 0.0 0.0 25.0 51.1 59.3 45.6 38.3 31.0 Interestan Existing Dbt 66.4 214.8 278.2 264.5 2S2.2 213.4 108.6 126.6 102.4 7.5 57.2 Interesto ShotTerm Debt 10.21420.1 59.90 99.31 99.31 97.97 8105 31.71 .00 BO0

Income2,cfwe Tax 9.1 (189.8) (15.0) 333.2 437.0 S1.S 1,130.01,159.7 1,106.5 1,191.9 1,27. 1 lessincome tax 0.0 0.0 0.0 57.7 75.8 90.0 608.7 669.8 639.0 690.1 735.8

NctIncme 9.1 (189.8)(15.0) 275.5 361.9 429.5 SZ1.2 490.0 467.5 501.8 538.3 OividentPayout 0.8 0.0 (0. 0.8 0.0 0.0 0.0 0.0 8.0 0.8 0.0

RetainedEarnings 9.1 (189.8) (15.0) 275.5 361.9 429.5 521.2 490.0 167.5 504.8 538.3 =_._ = =,_ === ==__ _ = = __ , Ratios OpraftingProfit Rs I OfSales 4.A 3.9 13.9 22.6 Z.6 19.8 26.3 23.0 19.9 19.0 17.9 let ProfitAs I OfSales 0.7 (11.7) (0.7) 9.6 10.6 10.2 9.7 9.5 8.1 8.8 9.3 - 139 - ANlNEX6-5 Page 3

CEMENT CORPORATION OF INDIR PROJECTED FUNDS FLOIJ STRTEMENT tJITH PROJECT (In Millions Of Current Rs..) 81/858/86 06/8787/88 O89 89AD 90/9191/52 92r3 93/5 9t/95

(Est.). . Forecast. SourceOf Funds

NetInccme Rfter Interest A Taxes (189.8) (1S.0) 275.5 361.9 129.5 521.2 490.0 167.5 50W.8 538.3 Ow-eciation 237.1 319.3 332.5 350.0 502.1 662.2 697.0 733.7 772.3 813.0 hoertizatio 16.6 16.6 16.6 16.6 16.6 0.0 0.0 0.0 0. N0.0 InterestChBrges 255.1 298.7 321.1 351.6 337.7 337.7 256.0 179.7 116.9 *.3

InternalFund Eeneration 319.0 619.5 951.0 1.100.11,285.8 1,521.1 1,4t3.0 1.380.91,351.0 1,139.5

ExternalSources: IR0Project Loan 0.0 23.0 133.3 136.3 1.1 0.0 0.0 LO 0.0 0.0 Fin.Inst. ProjectLoan 0.0 2.3 4.3 53.5 14.6 0.0 0.0 0.0 0.0 0.0 Otherloans a Deposits 512.5 172.7 510.0 137.7 0.0 0.0 LQ 0.0 0.0 0.0 Equity 185.0 725.3 138.0 90.9 14.9 ShortTern Borrwings 117.0 32.8 451.0 133.2 237.0 0.0 0.0 0.0 0.0 L0

TotalExternal Sources t1.5 956.11,210.5 551.7 267.9 0.0 0.0 0.0 0.0 0.0 t'al sources 1,163.51,575.6 2,195.5 1,631.8 1,553.7 1,521.1 1,443.0 1,380.9 1,391.0 1,135.5

OpplicationOffunds

OtherProject I Norral CapitalInvestments 00.0 938.0 897.0 383.9 379.5 355.5 20L5 442.7 466.0 190.5 findharCapital Inwestment 0.0 31.5 191.3 Z81.6 15.8 0.0 0.0 LO 0.0 0.0 InterestCharges 255.1 298.7 321.4 351.6 337.7 337.7 256.0 179.7 116.9 83.3 RpapmentOfExisting Debt 156.1 131.1 531.6 226.1 300.8 211.9 161.8 209.8 205.8 107.1 RepayentOf Project Det. 0.0 LA 0.0 0.0 0.0 0.0 26.3 52.7 52.7 52.7 Repapmtof ShortTerm Oebt 0.0 64.9 0.0 191.9 271.6 416.1 (.0) 0.0 0.0 0.0 anqesIn U.C. (22.6) 78.5 222.2 166.1 189.3 231.3 107.2 16.0 17.4 15.2

TatalApplication OfFunds 1,108.61,545.6 2,159.5 1,601.8 1,523.7 1,626.9 1,271.8 900.9 858.7 933.7

Incrasrease in CashBalances (25.1 30. 30.0 30.0 30.0 05.8) 171.2 *80.1 535.3 605.8 RccwdatedCash 30.0 60.0 90.0 120.0 150.0 41.2 215.4 695.51,230.8 1,836.6

DebtSeruice Cowvage Tems 0.8 1.5 1.2 2.2 2.3 3.0 1.9 3.1 3.7 4.1 - 140 - ANNEX 6-5 Page 4

CEMlENT CORPORATION Of INDIR PROJECTEO BRLRNCE SHEET UITH PROJECT (In Millions Of Current Rs..) 8S/8585/96 86/87 97188 989 89/90 90t91 91/92 92/93 93/4 94/55

(Est.). forecast. 15SETS

CurrentRssets: Cash 55.1 30.0 60.0 90.0 120.0 150.0 14.2 215.4 05.5 1,230.91,936.6 ficcountsReceiuable 77.5 93.5 126.1 158.9 220.4 251.2 311.7 330.2 330.2 330.2 330.2 Inventories: StoresA Spares 330.8 275.1 362.6 493.8 684.0 792.2 510.91,015.4 1,830.3 1,045.6 1,951.3 Packinglaterial 41.4 liLl 60.6 86.6 103.4 126.6 116.1 156.8 157.1 157.5 157.5 Ralaterial 76.2 97.9 107.0 152.5 181.9 220.9 255.1 274.5 276.5 278.7 280.4 Sen-finished6oods 74.3 92.1 115.2 16.2 196.7 210.9 307.6 330.1 338.6 331.5 331.5 finishedGaods 63.4 78.6 98.3 111.0 167.9 215.6 262.6 281.7 282.2 282.9 202.9

TotalInventories 586.0 502.5 743.81,039.2 1,334.0 1,586.2 1,912.6 2,958.S 2,076.6 2,096.2 2,113.6 LoansA Advanc 44.1 330.0 198.5 627.7 971.4 993.113232.2 1,305.6 1,305.6 1.305.6 1,305.6

TotalCurrent Assets 1.112.71,026.0 1,428.1 1,915.7 2,5s5.8 2,980.5 3,58O.8 3,909.7 1,497.9 1,962.9 5,596.0 OtherRssets 25.1 25.1 25.1 25.1 25.1 25.1 25.1 25.1 25.1 25.1 25.1 FixedAssets Grossfixed Rssets 1,877.53,701.8 3,811.8 4,012.1 1,223.6 7,590.1 7,985.5 8,10.4 0,853.19,319.0 9,809.5 AcculatedDepreriation 566.9 801.O1,123.3 1,155.9 1,885.9 2,308.0 2,970.1 3,667.2 1,19.9 5,173.25,986.1

Netfixed Assets 1,310.7Z,897.9 2,689.5 2,556.6 2,417.7 5,282.1 5,019.8 4,743.3 4,452.2 4,115.9 3,823.4 aorkIn Progress 1,771.3 747.01,609.5 2,187.2 2,941.5 0.0 0.0 0.0 0.0 0.0 0.0

Totalfixed Assets 3,081.93,644.8 4,298.0 5,043.8 5,359.2 5,282.1 5,019.8 4,743.3 1,452.2 4,145.9 3,823.4 OeferredExpedibtre 82.8 66.2 19.7 33.1 16.6 .0 .0 .0 .0 .0 .0

TOTRLRSSETS 4,332.41,762.0 5,801.1 7,017.7 7,96.1 .8,289.08,545.6 8,678.1 9,895.2 9,133.7 9,434.5

URBIUTIESI EQUITY

CurrentLiabilities: AccountsPayable 124.7 112.8 159.0 204.1 279.4 316.9 359.8 382.6 381.7 386.9 309.0 AdvnesFran Customers 261.6 291.2 439.9 553.9 768.9 876.31,087.3 1,152.0 1,1 52.0 1,152.0 1 ,152.0 OtherCurrent Liabilities 290.9 311.1 378.1 909.0 993.71,030.6 721.8 769.0 768.0 768.0 768.0 CurrentPortion Of LTD. 156.1 131.1 531.6 226.4 300.8 211.9 48R.1 262.5 258.5 239.7 52.7

TotalCurrent Liabilities 823.3 846.21,511.6 1,893.4 2,342.9 2,435.6 2,660.1 2,565.0 2,563.1 2,546.5 2,361.7 Log TernDebt: PublicDeposits 107.1 11.4 526.t 1491 119.2 9.2 0.0 0.D 0.0 0.0 0.0 OtherProject Loans 1,336.81,712.2 1,645.8 1,995.4 1,939.7 1,719.0 1,546.2 1,094.4 871.7 668.9 481.8 ConuersionProject Loan 0.0 0.0 25.3 162.9 352.8 368.8 368.8 342.5 289.8 237.1 184.4 lesscurent portion 156.1 131.1 534.6 226.4 300.8 211.9 498.1262.5 258.5 239.7 52.7 otal LongTe Oeht(Het) 1,5I8.01,999.5 1,662.9 2,084.1 2,110.9 1,915.0 1,426.9 1,164.4 906.0 666.2 613.5 ShareHolders funds ShareCaptal 1,503.41,688.4 2,413.7 2,551.7 2,642.6 2,657.5 2,657.5 2,657.5 2,657.5 2,657.5 2,657.5 Resvs RetainedEarniqns 17.8 2ZB.0 213.0 188.5 950.11,279.9 1,801.2 2,291.2 2,758.7 3,263.5 3,W1.8 - 141 - ANNEX 6-5 Page 5

TotalShare Holders runds 1,921.11,916.1 2.626.5 3,040.2 3,493.03,937.1 4,458.6 1,940.5 5,416.1 5,921.0 5,159.3

TOTALURBILITIES a EQUITY 4,332.1 4,762.8 5,801.1 7,017.7 7,946.78,288.0 8,545.6 8,678.1 8,885.2 9,133.7 9,131.5

Ratios: CurrentRatio 2.0 1.8 1.3 1.1 1.6 1.9 2.2 2.8 3.1 3.6 1.6 LongternDebt/Equity 5.55 51.49 39.61 11.59 38.62 33.67 21.76 19.81 14.86 10.90 9.91

Industry Department October 1985 ANNEX6-6 - 142 - Page 1*

11DIA - CEMENTINDUSTRY PROJECT

India Cenents Linited ______Sunnarized Historical Financial Statenents ------(Millions Of Rs.) 1980/81 1981/82 1982/83 1983/91 1984/85 Incone Statenent ------

Capacity (CflllTons 1.5 E5 1.S 1.4 1.1 Production (fill.Tons) 1.1 1.3 1.0 1.4 1El Utilizat.on Rate (X) 741 83X 66X 100X 100X

Sales 313.0 419.9 592-4 703.6 965.4 Net ProfitCloss) (28.0) 1E0 81.0 32.1 37.0

Net Profit CX of Sales) -8.9% 0_ZX 11.2Z 4.6X 3.8X Debt Seruice Coverage -0.1 1.3 3.8 3.1 1.4

Balance Sheet

Current Assets 157.4 202.1 238.6 290.3 295.2 Inuestnents 1W 11.8 18.2 3.8 5.9 Fixed Rssets 115.6 116.6 156.6 204.9 259.2

Total RAssets 284.1 330.5 413. 1499.0 560.3 ======,== = =

Current Liabilities 153.0 199.5 222.4 217.6 294.0 Long Tern Debt 92.2 92.4 8C.4 135.2 96.2 Equity 38.9 38.6 110.6 116.2 170O1

Total Liabilities 284.1 330.5 413.4 199.0 560.3

Ratios Current Ratio 1.5 1.4 1.5 1.9 1.4 Debt/Equity Ratio 7D030 71.29 42.58 48.52 36.64 - 143 - ANNEX6-6 Page 2

INDIA CEMENTS LII TlED Forecast Incone Statenents

(in Rs. nillions) Yu endingffhrch2 85 86 87 e 89 90 91 92 93 91 5 (Dud). frecst .

LevyOPC tlR 159.2 168.3 180.9 39.6 380.7 661.8 911.0 911.0 911.01,105.5 PPC MR 231.9 215.1 263.5 Z25.7 216.5 37.5 Z2.5 229.5 228.5 (.0) hn levyWC HR 22.6 321.5 34L9 133.3 402.2 SZ1.8 705.4 705.1 705.4 952.7 PWC NR VA1.0 186.7 523.2 288.9 321.5 319.9 I6.1 176.4 176.4 (.0)

TDtal l.es 65.1 1,097.71,224.6 1,316.5 1,296.5 1,130.91,919.0 2,021.3 2,021.3 2,021.3 1,958.1

CRI 1.0 1.1 1.1 1.1 1.1 1.1 1.2 1.Z 1.2 1.2 1.2 CRR 6.0 6.1 7.0 7.0 5.3 5.5 6.2 6.1 Li 6. 6.2

NetSales 558.1 1,090.31,216.5 1,308.1 1,290.0 1,12.3 1,910.62,016.7 2,016.7 2,016.7 1,950.8

JariableCost 665.1 750.1 833.2 901.1 926.3 970.2 1,103.61,186.0 1,197.6 1,209.61,190.0 rixedCost 179.5 2Z.1 206.5 205. 205.8 221.2 236.1 219.2 218.2 219.2 219.2 ebes in Inuetoies (. 0) (59.1) 12.7 10.9 0.7 1.2 21.7 13.6 1.5 1.5 (1.2) Net. ainfoundry Operations (5.5) (7.5) 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0

OperatingProfit Before Bep. 106.0 70.5 198.6 218.5 161.7 216.0 601.2 605.1 581.3 569.4 512.1 Depreciation Exsting 29.7 30.7 42.3 15.8 6.? 17.0 12.0 35.0 33.1 29.1 22.3 ConversionProject 0.0 0.0 0.0 0.0 29.0 51.0 50 58.0 51.0 59.0 58.0 kertizationof IDC 0.0 0.0 0.0 0.0 0.0 19.1 15.1 13.1 19.9 ItI 19.1

TotalDepreciation 29.7 30.7 12.3 15.8 75.6 129.3 119.3 112.1 110.5 10.1 99.6 Interest Intereston Existing Debt 12.0 23.2 36.5 37.7 31.5 30.6 26.1 22.3 19.1 11.6 B.7 Intereston Project Leans 7.6 1.0 9.3 10.2 17.0 106.2 IOD.O 97.3 92.1 79.3 51.9

TotalInterest 19.6 27.2 5.8 17.9 81.5 136.9 126.1 119.7 111.2 92.9 67.7

let Ince BeforeTax 56.7 12.6 110.5 121.9 10.6 (15.2) 358.5 373.1 359.7 371.2 315.1 less Taxpapent 19.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

let Incme 37.0 12.6 110.5 121.9 10.6 (15.2) 350.5 373.1 359.7 371.2 395.1 less diuidend 9.8 9.9 9.8 11.7 19.6 19.6 19.6 19.6 19.6 19.6 19.6

RetaindEarrnngs 27.2 L2 100.1 110.2 (9.8) (31.8) 338.5 353.5 390.1 351.6 325.5 Ratio OperatingProfit/Sales 8.02 3.72 12.5 13.2% 7.1% 8.5S 25.1% 24.1 23.3% 23.01 21.21 NetIncauSales 3.95 1.2S 9.1% 9.5% 0.8X -1.11 18.19 18.5S 17.89 18.9? 17.71 - 144 - ANNEX6-6 Pa&a 3

INDIR CEMENTS LTD. Forecast Statenent of Source t Rppllcation of Funds ------__---- (In Rs. Millions) Yearending March 31 95 86 97 89 89 90 91 92 93 91 95 (Rfd).Forecast. SlUE MetIncone after tax 37.0 12.6 110.5 121.9 10.6 (15.2) 35B.S 373.1 359.7 371.2 315.1 add: Interest 19.6 27.2 15.B 47.9 81.5 136.9 126.1 119.7 111.2 92.9 67.7 Depreciation 29.7 30.7 12.3 15.9 75.6 121.3 119.3 112.1 110.5 105.1 99.6 A Ihortization

InternaFunds 6enerated 86.3 70.5 198.6 219.5 167.7 246.0 601.2 605.1 591.3 569.1 512.1

ExternalFunds HormlBorrouing 11.3 151.1 52.9 2.1 1.0 0.0 0.0 0.0 0.0 0.0 0.0 I9OLoan 0.0 7.1 121.7 399.0 56.5 0.0 0.0 0.0 0.0 0.0 0.0 OtherProject Loans 0.0 1.2 75.7 119.0 22.0 0.1 0.0 0.0 0.0 0.0 0.0 DebentureIsses 0.0 0.0 75.0 121.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 DeferredPaynent 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.0 0.0 0.0 TernBarrgwing 7.8 0.0 31.1 5.1 0.3 0.0 0.0 0.0 0.0 0.0 0.0 RccInterestu Cm Debentres 0.0 5.1 11.7 13.2 ShortTern Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Equity/SubordinatedDebt (3.3) 0.0 0.0 36.8 30.0 0.0 0.0 0.0 0.0 0.0 0.0

TotalExtenal Sources 18.7 1?6.0 367.1 611.5 122.0 0.0 0.0 0.0 0.0 0.0 0.0

TOTLSOURCES 105.0 215.5 566.0 923.1 219.7 216.0 601.2 605.1 581.3 569.1 512.1

5555 == C_==== =C--= =2=2== , _=_ _,_,__=_ ==2=C2=55-= - RPPUCRTION NornalExpenditure 90.1 123.1 99.1 17.4 11.1 17.1 50.7 53.2 53.2 53.2 53.2 ProjectExpenditures 13.1 227.1 527.3 89.0 Interst duringContruction 0.1 15.1 59.2 60.5 Repamentof LTD 10.6 21.5 11.2 21.3 23.2 51.6 63.9 68.S 90.5 173.4 191.1 Repanentof ShortTern Loans 0.0 O.D 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 OtherInteuest Chrges 19.6 27.2 15.9 17.9 81.S 136.9 126.1 119.7 111.2 92.9 67.7 ConversiononCum Debentures 30.0 Changesin Uorking Capital (62.8) (39.1) (S.1) (6.1) (2.3) (7.2) (18.7) (1.0) (0.6) (0.6) 3.9 Dividends 9.8 9.8 9.8 11.7 19.6 19.6 19.6 19.6 19.6 19.6 19.6

TOILRPPUCRTIONS 97.6 155.3 106.2 681.7 315.7 251.4 211.9 257.0 M73.9 339.5 335.8

223 2=2C=2C C3= G-C5 ,2=2== G=555 ==T C CCC= C_*5C2 -22C -- ==,= Inc(Oec)in Cash3 Bank 7.1 91.1 159.8 130.1 (56.0) (5.3) 362.3 31B.1 307.1 230.9 176.6 Cashat begof yea 30.0 37.1 120.6 298.4 126.9 370.8 365.5 72.7 1,075.91,383.3 1,611.2 Cashat endofyear 37.1 128.6 29B.1 126.8 370.8 365.5 M.? 1,075.91,383.3 1,611.2 1,790.8 DebtSeruice Couerage Ratio 1.1 1.5 3.3 3.0 1.6 1.3 3.2 3.2 2.5 2.1 2.0 - 145 - ANNEX6-6 Page 4 INDIR CEMENHISLIMITED Forecast Proforna Balance Sheets ------(In Rs. Millions) Yearending llarch 31 85 86 87 08 09 1 91 92 93 94 95 (Rud) e. acasta. RUSETS

CurrentRssets Cash8 flnk 37.1 128.6 288.1 126.8 370.8 365.5 727.71.075.9 1,383.3 1,61t.2 1,790.8 RccountsRecrtusble 21.5 32.9 36.7 39.5 38.9 12.9 57.5 60.7 60.7 60.7 S8.7 Inventory 176.2 116.8 129.6 110.5 111.2 115.1 170.0 183.6 185.1 186.6 185.1 OtherCurrent Omset: 57.1 59.1 62.3 67.0 72.0 77.1 82.7 86.8 56.8 86.8 86.8

TotalCurrent Assets 255.2 337.5 517.0 673.7 622.8 631.11,038.0 1,107.0 1,715.9 1,9tt.1 2,121.8 FixedRssets: PlantGross Value 288.8 U2.3 751.71,296.1 1,t29.6 I 177.01,521.7 1,580.9 1,631.2 1 .687.1 1,740.6 less Oepreciation 29.7 60.3 102.6 118.1 221.0 329.0128.9 521.9 613.0 699.0 M.3 NetPlant Ualue 29.1 364. 619.11,118.0 1,205.6 1,118.0 1,098.8 1,059.0 1,021.2 988.1 561.3 IOCCapitalized 0.0 0.1 15.8 75.0 135.5 116.2 96.8 7.1 58.1 38.7 19.1

TotalFixed Rssets 259.1 365.3 661.91,223.1 1,3I1.1 1,261.2 1,195.6 1,136.5 1,079.3 1,027.1 960.7 OtherAssets 5.9 5.9 5.9 5.9 5.9 5.9 5.9 S.9 5.9 5.9 S.9

TotalRssets 560.3 708.71,187.8 1,902.7 1,69.9 1,901.32,239.5 Z,515.1 2,801.1 2,981.1 3,108.t CCS- ======^== =3=53= E=3X = fl ==55*5=t 5=5===: r-=3= =33=3= =GC533 LIRBILITIES8 (QUITY

Cur-rentLiabilities lccountsPayable 31.5 28.6 31.2 33.3 31.0 35.7 48.2 13.0 13.1 13.7 13.1 Custoner'sAduances 89.1 51.9 61.2 65.8 61.8 71.5 95.9 101.2 101.2 101.2 97.9 TradeDeposits 18.0 27.1 30.6 32.9 32.1 35.8 18.0 50.6 50.6 50.6 15.0 OtherCurrent Liabilities 131.9 152.7 170.8 197.9 189.1 198.3 220.6 231.7 236.5 238.3 236.5 Current1aturities of LT0 20.5 11.2 21.3 23.2 S1.6 63.9 68.5 90.S 173.1 191.1 0.0

CurrentLiabilities 295.0 277.8 318.2 353.1 375.2 105.3 173.2 520.1 605.1 625.2 126.8

LongTern Debt 116.7 272.2 620.31,152.2 1,207.7 1,153.1 1,0898. 1,020.7 930.2 756.0 565.1 less: Cur.Mlaturities 20.5 11.2 21.3 23.2 51.6 63.9 68.5 90.5 173.1 191.1 0.0

NetLong Tern Oebt 56.2 258.0 596.01,129.0 1,153.1 1,089.2 1,020.7 930.2 756.0 565.1 565.1

(0(11YM RSRES EQuty 19.0 15.0 49.0 85.0 115.7 115.7 115.7 115.7 115.7 115.7 115.7 EarningsI Reserves 121.1 123.9 221.6 331.8 325.8 291.0 625.9 903.11,323.5 1,675.0 2,008.5

TotalEuity A Resrves 170.1 172.9 273.6 420.6 1t1.5 106.7 715.61,099.1 1,139.2 1,790.8 2,116.3

TotalUabilities and Equity 56.3 708.71,107.8 1,902.7 1,569.9 1,901.3 2,239.5 2,59.1 2,881.12,981.4 3,10.4

Ratios CurentRatio 1.1 1.5 2.0 2.3 2.0 1.9 2.8 3.t 3.1 3.7 6.5 Debt/EquityRbtio 36.61 60.19 69.31 73.27 72.20 73.27 58.12 16.51 31.66 21.76 21.79

Industry Department October 1985 ANNEX6-7 - 146 - Page !

INDIA - CEMENTINDUSmY PROC

K. C.P. Linited

Summarized Historical Financial Statenents

(Miillions Of Rs.) 1980/81 1981/82 1982/83 1983/84 1984/85 Inconie Statenent ------______Capacity

Sales (Consolidated> 396.7 541.4 672.7 1 ,048.1 855.4 Net ProfitCloss) 31.0 38.4 25.9 40.5 59.9

Net Profit (X of Sales) 7.8Z 7.1Z 3.9X 3.9X 7.02 Debt Seruice Couerage 6.1 5.6 3.8 2.0 1.6

Balance Sheet ______Current Rssets 202.8 340.8 438.8 465.9 560.5 Inuestnents 122.3 149.0 190.5 182.0 57.6 Fixed Rssets 121.7 165.2 176.7 181.7 160.5

Total Rssets 446.8 655.0 806.0 829.5 778.6

Current Liabilities 259.2 344.8 403.4 405.5 338.3 Long Tern Debt 29.0 127.4 205.6 193.6 127.3 Equity 158.6 182.8 197.1 230.5 313.0

Total Liabilities 446.8 655.0 806.0 829.5 778.7

Ratios Current Ratio 0.8 1.0 1.1 1.1 1.8 Debt/Equity Ratio 15.85 41.59 51.49 46.54 31.69 - 147- ANNEX6-7 Page 2

THE K.C.P. LTD. Forecast Incone Statenents CIn Rs. flillions)

Yearending June 30 85 86 87 88 89 90 91 92 93 94 95 96 (Rct).forecast. Sales CementUnit 187.9 162.9 171.? Z18.7 271.6 331.3 M01.1 121.1 21.1 21.1 t21.t 121.3 SugarUnit m.s 322.9 316.3 372.3 400.2 430.3 157.1 180.0 t80.0 480.0 480.0 480.0 EngiieenrngUnit 390.0 310.5 277.5 Z38.7 230.9 248.2 263.7 276.9 276.9 2m6.9 276.9 276.9

TotalSales 855.1 796.4 798.6 829.7 902.81,009.7 1,1Z2.3 1,178.1 1.178.3 1,178.3 1,178.3 1,178.3

Costof Production Cent Unit 122.7 111.2 120.8 151.0 175.0 198.1 213.2 226.4 2.0 231.7 234.4 237.3 SugarUnit 222.1 266.8 287.9 317.1 343.2 372.6 398.8 122.6 426 tX6 4U2.6 422.6 EngieeringUnit 288.9 227.2 Z05.4 178.4 172.5 189.7 202.6 213.2 Z12 213.2 Z13.2 213.2

Total 634.0 605.2 611.0 646.5 690.7 760.7 814.5 862.2 861.9 B67.5 870.3 873.1

OtherExpenses (ent Unit 17.Z 17.8 19.6 Z.6 23.8 26.2 27.8 29.Z 25.2 29.2 29.2 29.2 SugarUnit 8.2 16.2 18.0 20.3 21.8 23.5 24.9 26.2 26.2 26.2 26.2 26.2 EngineeringUnit 34.5 18.1 16.1 17.7 19.9 21.4 22.7 23.8 23.8 23.8 23.8 23.8 Cagesin Inentory 3.0 (7.4) 0.9 11.8 Z7.8 406 42.8 21.3 (.8) (.0) 0) (.0)

Iotal 62.9 4.7 54.5 71.3 93.2 111.7 118.2 100.5 79.2 79.2 ?9.2 79.2

GrossProfit 158.5 116.4 138.1 111.8 118.8 137.4 189.6 215.6 234.2 231.5 Z28.8 225.9

Depreciation (tnt onit 15.5 10.2 7.8 77.5 54.3 30.0 26.6 18.6 11.6 11.3 8.5 6.1 SugarUnit 5.9 5.7 5.6 .6 5.5 5.3 5.2 5.1 S.0 .8 4.7 4.6 EngineeringUnit 20.1 17.0 12.8 10.2 8.5 7.2 6.6 6.2 S.8 5.5 5.1 1.8

Total 41.5 32.9 26.3 93.3 68.2 50.5 38.4 29.9 25.4 21.6 18.3 15.6

InterestCarges 24.0 2?.5 11.5 17.0 39.9 29.4 21.2 18.8 16.6 12.7 8.8 5.6

TotalProfit Before Tax 93.1 86.0 62.3 (28.0 10.7 57.4 ;29.9 166.9 192.2 197.3 281.7 201.7 Prouisionfor Taxation 33.3 34.9 35.1 0.0 0.0 8.8 25.1 59.5 69.2 69.2 69.2 69.2

ProfitRfter Tax 59.9 51.1 27.2 (28.4) 10.7 48.7 104.8 107.1 123.0 128.0 132.1 135.5 Dividend 11.1 11.8 1Z.7 13.6 11.7 15.8 16.7 17.6 17.6 17.6 17.6 17.6

RetainedEarnings 48.4 39.2 11.5 (42.1) tt.0) 32.9 88.0 09.8 185.4 110.5 114.8 117.9

RccilatedEarnings 236.7 Z76.0 290.5 24L.4 24t.4 277.3 365.3 455.1 560.6 671.0 785.9 903.7

Ratios GrossProfit/Sale 18.5S 18t4 16.32 13.51 13.2 13.62 16.92 18.31 19.9Z 19.71 19.42 19.22 NetIncne/Sale 7.8 LIZ LIZ -3.4 1.21 4.81 9.32 9.1 0.40 18.92 11.21 11.52 - 148 - ANNEX6-7 Page 3

THE KC. P. LTD. Forecast Staterment of Source and Rpplication of Funds 4in Rs. Millions) Yearending June 30 85.0 86.0 87.0 88.0 89.0 90.0 91.0 92.0 93.0 91.0 95.0 96.0 (Est.) . Forecast. SOURCEOFFUNDS ProfitRfter Tax 59.9 51.1 27.2 (28.1) 10.7 18.7 10t.8 107.1 1Z3.0 128.0 132.1 135.5 addinterest charges 21.0 27.5 11.5 17.0 39.9 29.4 21.2 10.8 16.6 12.7 8.8 5.6 depreciation 11.5 32.9 26.3 93.3 68.2 50.5 38.1 29.9 25.1 21.6 18.3 15.6

InternalCash 6enerated 125.3 111.5 95.0 111.8 118.8 128.6 164.4 156.i 165.0 162.3 iS9.5 156.7

ExternalSourcs Equity 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 IBR1Loan 0.0 31.0 27.9 4.0) 0.0 0.0 0.0 0.0 o.O 0.0 0.0 0.0 OtherProject Loans 0.0 19.8 88.1 (.10; 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Non-ProjectInstitution Loan 0.0 10 0.0 0.0 uii 0.0 0.0 0.0 0.0 0.0 0.0 0.0 TernBarrouing 0.0 40.1 10.3 0.0 0.0 0.0 0.0 20.0 0.0 0.0 0.0 0.0 DeferredPaumt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 OtherUnsecured Loans 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 u.n

TotalExternal Sources 0.0 90.9 126.3 (.0) 0.0 0.0 0.0 20.0 0.0 0.0 0.0 0.1

TotalSoUrCes of funds J25.3 202.1 222.3 111.8 11B.8 128.6 161.1 176.1 165.0 162.3 159.5 156.7

APPLICAIDOOFFUNDS wrralExpenditures 13.0 18.0 8.0 8.0 8.0 8.0 8.0 0.0 8.0 8.0 8.0 8.0 ProjectCapital 0.0 65.7 166.1 10.3 Oew 90.0 Repaymentof [TD 53.3 15.4 9.2 31.1 55.5 76.6 32.5 28.8 28.8 28.8 218. 16.9 InterestCharges 24.0 27.5 41.5 17.0 39.9 29.1 21.2 18.8 16.6 1Z.7 8.8 5.6 Increasein UC other than cas 3.0 (11.1) (.0) 2.3 5.6 8.3 8.8 1.3 (.0) (.0) (.0) (.0) DividendPaients 11.1 11.8 12.7 13.6 lI.? 15.8 16.7 17.6 17.6 17.6 17.6 17.6

TotalRpplications 104.7 127.1 237.8 112.6 123.8 138.1 87.3 167.5 71.0 67.1 63.2 18.1

=c__=-M= ====-= ===:_= ===s= _=:-= ~-&= _== =_= _ ======M==t fccvimuatedCash Year Begin 37.0 57.6 13Z.9 116.1 115.6 110.6 101.2 178.3 186.8 20.8 376.0 172.4 RccumlatedCash Year End 57.6 132.9 116.4 115.6 110.6 101.2 178.3 186.8 2BO.8376.0 472.1 580.9

DebtSeruice Coverage atio 1.6 2.6 1.9 1.4 1.2 1.2 3.1 3.3 3.6 3.9 1.2 6.9 ANNEX 6-7 - 149 - Page 4 THE K.lC..P.LTD- Forecast Proforna Balance Sheets (In Rs. Millions) Yearending June 30 es 86 87 88 89 90 91 92 93 54 95 96 (Act).forecast. RSSETS

CURRENTASSETS CashB Bank 57.6 132.9 116.4 115.6 110.6 101.2 179.3 186.8 2nO.e 376.0 172.q 580.9 RcctsReceivable 95.0 B7.6 87.8 51.3 99.3 111.1 123.1 129.6 129.6 129.6 129.6 129.6 Inventories 310.0 302.6 303.5 315.3 313.1 383.7 126.5 117.8 117.8 117.8 117.7 117.7 LoansA Rduances 165.0 165.0 165.0 165.0 165.0 165.0 265.0 165.0 165.0 1bb.0 165.0 165.0 OtherCurrent Rssts 0.5 0.5 0.6 0.6 0.6 0.7 , 0.7 0.8 0.8 0.8 0.8 0.8 …_-- _ _…/… - --- … TotalCurrent Assets 615.1 688.6 673.3 687.7 71B.6 761.6 893.9 930.01,021.0 1,119.11,215.5 1,321.0

FIEDASSETS 6rossBlock 5OB.7 592.4 766.8 785.1 793.1 801.1 809.1 907.1 915.1 923.1 931.1 939.1 lessdepreciation 318.2 381.1 107.3 500.6 568.8 619.3 657.? 637.6 712.9 731.5 752.9 768.5

NetBlack 160.5 211.3 359.5 281.5 221.31 1.8 ISI1A 215.5 202.2 188.6 178.2 170.6

TotalRssets 778.6 900.01,032.8 9,72.3 913.0 913.51,015.1 1,11.5 1,226.11,30?.7 1,393.7 1,15.1

LIRBILITIESRHO EQUITY

CURRENTLIRBILITIES Payables 170.0 167.2 167.7 171.2 189.6 212.0 235.? 217.5 217.1 217.1 217.1 247.1 RduancesRgainst Sales 150.0 159.3 159.7 165.9 180.6 201.9 221.5 235.7 235.7 235.? 235.7 235.7 OtherCurrent Liabilities 3.0 3.1 3.3 3.6 3.8 4.1 4.1 1.6 t.6 4.6 1.6 4.6 CurrentNlaturities of 110 15.1 9.2 31.1 55.5 76.6 32.5 28.8 28.8 28.8 28.8 16.9 0.0

TotalCurrent Liabilities 338.1 338.8 362.2 399.3 150.6 450.7 193.1 516.6 516.6 516.6 50.6 187.7

LONGTEI1 DEBT LongTern Debt 142.? 218.2 335.3 303.9 218.1 171.8 139.3 130.4 101.6 72.8 13.9 27.0 less: Cur.flatunties 1S.1 9.2 31.1 55.5 76.6 32.5 28.8 28.8 28.8 28.8 16.9 0.0

NetLong T-rn Debt 127.3 209.0 303.9 '9B.i 171.8 139.3 110.1 101.6 72.8 43.9 27.0 27.0

ElUITYNO fESERUES Equitu 76.2 76.2 76.2 76.2 76.2 76.2 76.2 76.2 76.2 76.2 76.2 76.2 Reserves8 Retained arnings 236.? 276.0 250.5 218.1 211.4 277.3 365.3 55.1 560.6 671.0 705.9 13.7

TotalEquity 8 Rels 313.0 352.2 366.7 321.6 32.6 353.5 111.5 531.4 636.8 747.2 862.1 980.0

TotalLiabilities I Equity 779.6 900.01,032.8 972.3 513.0 943.51,045.1 1,119.5 1,226.1 1,307.7 1,393.71,151.7

=== _======32 2,=== 2 _ =2=222 3= RATIOS CurrentRatio 1.8 2.0 1.9 1.7 1.6 1.7 1.0 1.8 Z 0 2Z 2.1 2.7 Dbt/E ty Rbtio 31.69 38.62 48.52 18.52 4.56 33.67 24.76 20.80 14.86 9.91 5.95 3.97

InduStry Depart October 1985 - 150 - ANNEX6-8 INDIA - CEIENT INDUSTRYPROJECT tiNCIRLRITE OF RELURN RlLYSIS: COST I BENEFIT STRERES (INHILLIONS or 1995 RS) RCC:OUKKRIRII RCC:SHIRE BIRLRJUTE: SITR CapitalIncrintal Optg. Net CapitalIncreuantal Optg. Net CapitalIncrerantal Optg. Net Years Cost CastsRevenues Ienefits Years Cost CostsRevenues Benefits Yews Cost CastsRevnues Benefits

1905/86 56.7 0.0 0.0 (56.7)1985/86 0.0 0.0 0.0 (80.8)1905/86 0.9 0.0 0.0 0.0 1986/87195.1 0.0 0.0 (195.1)1996/87 359.1 0.0 0.0 (359.1)1986/87 113.6 0.0 0.0 (113.6) 1987/88 31.3 0.0 0.0 (31.3)1987/08 277.2 0.0 0.0 (M.Z) 1987V80285.3 0.0 0.0 (285.3) 19908/9 .0 32.7 51.9 19.2198/8f9 15.5 79.5 173.1 79.91908/89 80.8 (25.9) 20.1 (30.7) 1909/90 7.0 1f.9 39.91969f90 79.0 221.5 111.71989A9O 1B.2 92.2 79.0 1990/1 36.3 99.7 63.51990/91 119.5 319.9 200.31990/91 ¶8.7 162.3 113.6 1991/92 71.1 156.3 82.21991/92 119.1 361.6 215.51991592 62.8 185.1 122.3 1992/93 87.5 173.9 86.t 19,/Z33 199.5 369.6 215.Z1992/93 62.7 185.1 122. 1993/51 0?.7 173.9 86.21993/91 119.9 369.6 2' t.8 1993/91 77.1 Z07.8 130.7 1994195 88.0 173.9 85.91991/95 150.3 364.6 214.11991/95 77.Z 207.8 130.6 1995/96 88.3 173.9 85.6199516 150.7 361.6 213.9195596 91.9 230.5 138.6 1996/9? 88.3 173.9 85.61996/37 150.7 361.6 213.91596/97 92.0 230.5 139.5 1997/50 08.3 173.9 05.61995/98 150.7 361.6 213.91997998 92.0 230.5 138.5 1980/99 89.3 173.9 85.61998199 158.7 369.6 213.51998/9 92.0 230.5 138.5 19995O0 00.3 173.9 85.61959900 150.7 364.6 213.9199940 92.0 Z30.5 139.5 2000/01 98.3 173.9 85.62008/01 150.7 364.6 213.92000/01 92.0 230.5 138.5 ZO1O2 80.3 173.9 85.62001Z02 150.7 361.6 213.92001/02 92.0 230.5 130.5 2002f03 98.3 1739 85.62002/03 150.7 361.6 213.9Z002A3 92.0 230.5 138.5 2003/84 88.3 173.9 95.62003/09 150.7 365.6 213.92003/01 92.0 230.5 138.5 2009/O5 89.3 173.9 85.62001/05 150.7 361.6 213.92009S05 92.0 230.5 138.5

InternalRate of Return- 18.1X Internl Rateof Return= 20.61 InternalRate of Return 20.51 CCI:IINIRW INOIRCEMENTS: SINKRRNRPR KCP:IICIERLI CapitalIncrerantal Dptg. Net CapitalIncreantal Optg. Net Capitaltncrernatal Optg. Net Years Cost CostsRevenues Benefits Years Cost CostsRewnues Benefits Years Cost CostsRevenues Benefits

1985/86 0.0 0.0 0.0 0.0 19505/6 12.9 S.1 0.0 (18.3)1981/B5 13.5 0.0 0.0 (13.5) 19864? 30.3 0.0 0.0 (30.3)190647 205.0 1.7 72.9 (139.6)1995/B6 65.1 0.0 0.0 (65.1) 1987/88153.6 0.0 0.0 (153.6)1987/88 143.0 (1.9) 72.9 (360.Z)1986/87 138.7 0.0 0.0 (138.7) 1988/89Z05.3 0.0 0.0 (206.3)19W89 59. (92.2) 13.6 (13.6)1987/088 (.0) (33.8) 32.1 65.9 1909/50 38.6 93.2 t5.61989/90 (68.8) 10.9 109.71989 (17.0) 66.7 89.5 1590/91 99.7 226.6 126.91950/91 5.3 167.3 162.01989/50 (1.7) 100.9 102.7 19912 131.5 28.1 156.61991/92 50.0 235.0 181.3199091 2.2 116.2 119.0 1992/3 131.0 288.1 156.31992/93 50.8 235.0 181.31991/92 6.1 122.5 116.3 1993/9* 132.1 288.1 156.01993/91 50.8 235.0 181.3199523 10.0 128.5 118.5 19941/5 111.8 301.3 162.51991/95 17.8 226.5 178.61993/91 13 131.3 120.6 199559 112.2 301.3 162.11995/6 97.7 226.5 178.71999195 17.5 139.9 122.4 1596/97 142.6 301.? 161.71996/97 97.7 226.5 178.71995/96 19.8 115.2 125.5 1997/98 112.6 309.3 161.71997/98 17.7 226.5 178.71996/97 19. 1,15.2 125.5 1999/39 112.6 309.3 161.7199099 17.7 226.5 170.71997/90 19.0 195.2 125.5 1999/08 . 2.6 304.3 161.71999/80 17.7 226.5 178.71998/99 19.8 115.2 125.5 2000/01 112.6 309.3 161.72000/01 17.7 226.5 178.71999/00 19.0 115.2 125.5 2001/02 112.6 301.3 161.7200102 17.7 226.5 178.72000/01 19.0 195.2 125.5 20023 112.6 301.3 161.72002/03 7.7 226.5 170.72001/02 19.8 115.2 125.5 2003M 142.6 30t.3 161.72003/01 17.7 226.5 178.72882f03 19.8 115.2 125.5 2004A5 112J 301.3 161.72001/05 41.7 226.5 178.72003/0M 19.8 115.2 125.5

InternalPate of Return= 28.2S InternalRate of Retwna 22.6? InternalRate of Retrn* 37.3S

Industry Dstpartment October 1985 IBRD 19204R I<5'71 HIMACHAL. IN DIA sv_ st PRADESF CEMENT INDUSTRYPROJECT

,S, OPI;.dIJAB- ., RegionalDistribution of ProjectedCement PA K I S T A N . Productionand Demandin 1989/90

/EELHI'K E /~~~~~~~~~~~~~~~~~A .'l

RAJASTHAN

MADHYA PtRA JUT A NGHADESH

,0-- R-- T A.DH RADESH

-MAHARASHTRA

s~~~~~~~~~B oowncc - s [ 3 95 ~~~~ ~ ~~WEST17.94 19.26 1.32 n I97on q f SOUTH 13,36 18.1S 4.79

KARNATAKA,__ ~~~~~TOTALINDIA 51.32 49.84 11.481

ALtedra |0.3 CEMENTPRODUCT IINPOJN MILLSNS OPTONS r-C-B.P*q-lz-, R I C DEMAND MILON CIONSOF (ENSI ~~~~~~~~~~~~TOAINI1- 492B (I-01 ; r skSea 3P > CEMEN. SUQPLUSStATES Sea~~~ ,.1--- CEMENTDEFICIT 5TATES pn P H PROjT CEMENTPLANT LOCATIONS

KILOM ETERS______,s..TAMIL NADUA A.C5 C COSMPANOEMIENTR~~~~nENAHES ROU OFN ATHERILL CEMENTOS O 'TPLANTS N

MILES . IMOICEENTDEFIIT SATE 0ou i rLL1 .Y]KR STATECAPITALS

oILCSETEFto 200 ° 300 0 500 KERALCEMEN NATIONAL CAPITAL

MlEo 100 200 300 oaCHl5ECCBUORS

tSRI -LANKA CEMENTPLANT ATIO

i...s.. _c ..- ws ed-, beorwe.|Du ro: sc.X' ccgceTO 5AlfCOStOf .tE AREAS F=o_Tae-_*mM d~Ij 1' MWN.uI.uq i 11MM17M eM ,- M*ILNDUI COCOU P NOT INCAMS T4ECMXENPANSEEIN F.u, mn Pwd 1Mw7W1 _lhM..TD..bc'a F h .wt t FORiNC /NIKNL THARMAT APA TOA

DECEMUBER 1AM IBRD 19205R HIMACHAL W INDIA -.- PRADESH s o...iD CEMENTINDUSTRY PROJECT RegionalDistribution of CementProduction

P A K I S T A N /0* Nr -.. and Consumphonin 1984 / 85

/ ;8J !'_\P4Z<^jBHUAN~A~

o 0BHUTANUTJAR PRADESH . BHUTAN RAJASTHAN # > M Paula. &,ASSAM

.J AAEGHALAYA

?_JINJAsR1^IUTI a 's H ETBN ANGLADESH l wrel@ a SMADHYA EPRADESHr} M^v< 4 w;-SBENG l~~~~E

200t t .ORISSA h:,- S

X<, 'figZAbAS ,, , ,,4,67 ,, V. J£......

86

NORTH 7 51 5.64 11.87) X - PRADESH EAST 5.17 2.82 (2.351 RAD 1 2 49H IWEST 10357 1.42I.IS zaGa91 140 1 vg ~~~~~ ~ ~~~~8.38 ~~SOUTH11.15 2.76 KANAAKI KARNATAKA'__ TOTJIL INDIA 30A7 30 17 10.301

SO > JIT4 H (^, | 0 3 CEMENTPRODUCTION (IN MILLIONSOF TONS)

_-J I 0 5 A CEMENT CONSUMPTION (IN MILLIONS O )

CEMENT SURPLUS STATES

_,I r I CEMENT DEFICIT STATES A PROJECT CEMENT PLAN LOCATIONtS

.m1e.0-..TAMILNADU A C.C 'OMPANY NAMES OF THE CEMENT PLANTS

,o00 1,L 2 43 % STATECAPITALS

0 o KERA4LAI * NATIONALCAPITAL KILOMETERS 100 200 300 400 S50 A 7 REGIONBOUNDARIES 0 100 20t 300 I' 0 t p T no.ndn.nisA SRI LANKA oKL- -h- S50.0D To- A-Ily

I ~ .. bD-t .- TV.'o8WlFl ulO'F d O f rDO SCAtE COAS/IDEPArTONI SOME AREAS NW -,00 a.. to E. DoW w of IDoM8 BP* _ M NW_ COJWDNOT RO INICWUDFON THEf A/AR. SEf TFrX Fs.mp rCGWMi. Ila Bto w md .,NWDo 2I.£W- 0- NW mm di FOR ANAY INFOMAATtON rTHArT MA V AALr AO _' r NWdn o w o " ' of U_ SuCr AREAS.

tl70D 1 DECEMBER 1985