Gujarat Ambuja - Redefining Operational Efficiency

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Working Hard Towards Operational Excellence

According to analysts, GACL's strategic farsightedness was evident in its decision to locate its plants in backward areas, so as to take advantage of substantial sales tax and income tax incentives2. GACL's units in the states of Gujarat, HP and Punjab also received sales tax incentives. This was possible as all new investments in cement after 1986 enjoyed a sales tax benefit of up to 90% of the value of fixed assets for a period of 14 years. To get the sales tax incentives on a continual basis, companies needed to incur constant capital expenditure. Thus, GACL continually expanded capacities in Gujarat and Punjab. The Himachal Pradesh plant had the advantage of prioritized power supply at a guaranteed cost for five years from the date of commissioning. The decision to set up a plant in HP made all the more sense because the region was cement deficit at that point of time. Also, the plant was closer to the mines and the Punjab grinding unit. Another reason GACL finalized the plant location in HP was that the area had substantial limestone deposits. However, there were three hills directly between the quarries and the nearest piece of flat land large enough for the plant.

Though the actual distance was just a few kilometres away, the only way existing was a 17 km stretch of road full of potholes. This would have involved time delays and large fuel bills for transporting the limestone to the plant location. GACL engineers decided to get a conveyor belt built across the three valleys, through the mountains. After many big construction firms refused to do the job, GACL built the conveyor belt on its own, in just 18 months. The distance was cut down to just 2.8 kms and the belt moved 800 tonnes of limestone every hour.

Even the company's latest plant at Chandrapur was set up to take advantage of substantial sales-tax benefits for almost 18 years. This unit was situated at the pit-head of coal mines, to save on freight costs. GACL's management realized that the time taken to set up a plant was not entirely in its hands. The company's actual work began after it had identified the right location, acquired the necessary license, power and water supply connections and machinery. From this point onwards, the work at the site was something the company could control. GACL decided to let its engineers define their own jobs and gave them the authority to take on-the-spot decisions regarding capital expenditure and schedules for achieving targets. The engineers were also allowed to set daily, weekly and monthly tasks for themselves.

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2] State governments in India provide various incentives to companies to set up industries in areas that are classified as 'backward,' a term used for undeveloped/under-developed regions. These incentives include sales tax concessions, availability of power at concessional rates, term loans with subsidized interest rates, capital investment subsidies and price preferences.