Gujarat Ambuja - Redefining Operational Efficiency

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Themes: Operational Restructuring
Period : 1993 - 2002
Organization : Gujarat Ambuja (GACL)
Pub Date : 2005
Countries : India
Industry : Cement

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Case Code : OPER009
Case Length : 12 Pages
Price: Rs. 300;

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Cutting Costs

- POWER
Power accounted for a large part of GACL's cost of production. GACL realized that a captive power plant would increase savings substantially as power sourced from the power grids was both unreliable and costly. So it set up fuel based captive power plants in Gujarat (40 MW) and Himachal Pradesh (12 MW) in 1998. GACL's captive power generation cost was only Rs 1.30 per kilowatt (excluding interest and depreciation), compared to Rs 4.50 per kilowatt for power supplied by the Electricity Boards. Soon, the company was not only getting around 60.3% of its total power requirement from these plants, it was also selling the excess power it generated to the local state governments. B S Dulani, Vice President, Operations, at the Gujambuja plant said, "Small measures like modifications in higher capacity motors for fans, coolers etc. according to specific requirements (shifting from AC to DC drive, which allows regulation of current) wherever possible, and many other simple steps helped reduce GACL's power consumption from 120 units/tonne of cement in 1987 to 88-90 units per tonne in 1995 against an industry average of 121 units per tonne."

- FUEL
Coal is an important source of energy for the cement industry. However, while most of the coal production in India is located in the central and eastern parts, the cement industry is concentrated in western and southern parts. Thus, the cost of transporting coal to the cement plants was very high. Moreover, the quality of coal was also very poor. Cement companies had to decide whether to use imported coal or substitutes like lignite, natural gas and oil.

GACL decided to import cheaper, higher quality coal from South Africa. The company also began importing better quality furnace oil for its diesel generator (DG) sets for its power requirements. This led to a considerable reduction in the operating costs of their power plants. GACL consumed only 96 kwh of power per tonne of cement against the industry average of 110-115 kwh per tonne. The company's coal consumption was also the lowest in the industry. GACL consumed 170 kg per tonne of cement while the industry average was 250 kg per tonne.

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