Representatives for the two truck unions for Darlaghat and Bilaspur claim that the freight rate that Adani Cement is seeking is unviable for operations in a hilly region. Adani Cement’s impasse with truck operators in Himachal Pradesh is now past the 40-day mark.
Of the three main demands Adani Cement placed before state government authorities last Friday, was usage of 50,000 km as the optimum km per annum in the calculation of freight charges. “This demand is not possible, the fuel ratio in hilly regions is low,” said Rakesh Thakur, President of the Bilaspur District Transport Cooperative Society (BTDS). ACC operates a cement unit in Bilaspur, Himachal Pradesh. This is one of the two units where Adani Cement has temporarily suspended operations starting 15 December.
Gautam Adani-promoted Adani Group acquired ACC and Ambuja Cements from LafargeHolcim in September. In an email response to Moneycontrol on Tuesday, Adani Cement said, “Due to transport unions’ unworkable position on the freight rate and distribution model, Adani Cement was forced to suspend its operations at its two cement plants in Himachal Pradesh (Ambuja’s Darlaghat Unit and ACC Limited’s Barmana Unit).”
In its email response, Adani Cement added, “Our plants at Gagal and Darlaghat are under severe pressure to reduce the cost of operations to sustain in the market. In our repeated pleas to the truck unions, we have requested a freight cost reduction for the transportation of our goods and material (cement, clinker, and raw materials).”
Meanwhile, Naresh Gupta, President of the All Himachal Truck Operators Federation, said, “They called us on 13 December and quoted a 44 percent less tariff and the next day the plant was shut down. The mileage that trucks drive at in hilly regions is lower than that of a plain, the rates are not comparable.” Gupta also represents the union of truck drivers from Darlaghat, Himachal Pradesh. Ambuja Cements operates a cement unit in Darlaghat, the second of the two units which have been temporarily shut down.
Adani Cement in their email response confirmed, “Due to the adamant stand of the truck unions demanding exorbitant freight rates, which are way higher than the prevailing market rates, we were compelled to shut down both plants with effect from 15 December 2022 as this has made our operations unviable. What is even more unfortunate is that local transport unions don’t allow other transporters to operate at competitive rates. This goes against that the free market spirit.”
Gupta’s group of truck operators now await a report on the matter by HIMCON Consultancy, which according to him is with the state government now. “A few weeks after the closure, a district sub-committee was appointed by the state government to resolve the issue. In turn, the committee appointed HIMCON to submit a report on the way forward,” he said.
Adani Cement, in its email response, said the management has been holding talks with all stakeholders, including the State government, to arrive at mutually acceptable terms.
Both Gupta and Thakur added the 40-day closure is taking a financial toll on truck operators. Gupta said that the union is exploring helping truck operators take personal loans to tide over the situation.
What dealers say
The closure has had varied impacts on dealers depending on what brand they stock – UltraTech dealers are witnessing higher demand, some Ambuja Cement dealers claim supply from the grinding unit in the state, and ACC dealers complain they are forced to idle away.
Moneycontrol spoke to dealers of ACC Cement who said that the closure of the units has hurt the business of some of the dealers. “We have been idle for the last many weeks. We keep receiving assurances from the company that the impasse will end in a day or two, but hasn’t. I will need to consider another brand dealership if this continues,” said an ACC dealer from the state.
But not all dealers are facing a supply crunch for ACC-Ambuja cement brands. “We are receiving Ambuja Cement from their Nalagarh grinding unit,” said another Himachal Pradesh-based cement dealer. Gupta from the trucker union confirmed, operations at Nalagarh have not been shut. “They continue to operate that grinding unit and also pay the truckers a higher freight,” he said. In its email response, Adani Cement did not comment on the grinding unit or loss of market share.
Disruption in supply of ACC-Ambuja has resulted in higher demand for UltraTech Cement in the region. “Demand has increased significantly in the last few weeks. UltraTech is also catering to the demand from government projects in the state which was earlier met by ACC-Ambuja,” said an UltraTech Cement dealer from Himachal Pradesh, adding the rise in demand has also increased the delivery time. “Delivery of cement is taking longer because of the sudden rise in demand. But given it is more than four weeks now, we have altered the inventory management accordingly,” the dealer added.
An email query sent to UltraTech on Monday remained unanswered. UltraTech operates two cement units ―at Baga and Bagheri in Himachal Pradesh.
What analysts say
Analysts point out UltraTech is the second-largest manufacturer in the state, after ACC-Ambuja. "Capacity-wise, Ambuja-ACC have the lion share at 60 percent of the total 12 Mtpa capacity in HP. Another 30-35 percent, as per our estimates, is UltraTech, and the remaining is other players,” said Satyadeep Jain, analyst at Ambit Capital.
Jain points out that UltraTech may be the immediate gainer, but any reduction in freight rates will translate into significant gains for ACC-Ambuja. “Any reduction in freight rates arising out the current impasse will benefit ACC-Ambuja most as HP (which has annual estimated demand of 7MTPA) contributes about 6-7 percent to their total India volumes. Meanwhile, UltraTech appears to be gaining some share for now, as dealer checks suggest ACC-Ambuja is losing market share,” Jain said.
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