Binani Cement Ltd.

A Micro Economics project to carry out production and cost analysis for industry.


Prof Rupamanjari Sinha Roy


Submitted by:
1. Vikas Saraswat (NMP-34) 3. Animesh Kumar (NMP-03) 5. Arvind Joni (NMP-08)
2. Mukesh Sahu (NMP-22) 4. Devendra Kumar (EM-03) 6. Kanchan Arya (NMP-13)








1
Index




























S. No. Description Page No.
1. Introduction and Industry Structure 3
2. Manufacturing Process 4
3. Raw material 4 7
4. Cost structure 8
5. Isoquant 9
6. Production cost 9
7. Long run and short run cost 10
8. Cost Elasticity 11
Exhibit
2
Introduction
The cement industry is one of India's core sectors. The country's first cement plant was set up in
Porbandar, Gujarat in 1914. Earlier, the government regulated the industry with licensing, price and
distribution controls. A gradual removal of these controls resulted in rapid capacity creation.
Following this, the country moved from a cement scarcity situation to a surplus position. Currently,
India is the second-largest producer of cement in the world.The pan India total installed cement
capacity stood at around 350-355 million tonnes as of 2012-13.
The evolution of the cement industry in India can be broadly divided into three periods :- the period
of total government control (up to 1982) - which witnessed strict control over the industry in terms of
production, pricing and distribution. The period of partial decontrol (1982 to 1989) - which was
introduced due to the inefficiencies of the uniform price system; and the period of total decontrol
(after 1989) - that opened up opportunities in the industry and was marked by huge investments.
Industry structure
As of March 2013, the total installed cement capacity in India stood at approximately 350-355
million tonnes. The industry can be broadly classified into pan-India, regional and standalone
players.
Pan-India players include large players like Holcim group companies- ACC and Ambuja and Aditya
Birla group company- UltraTech Cement (including Samruddhi Cement). Companies of both these
groups are adding capacities through either greenfield or brownfield expansions.
Players whose presence is restricted to one or two regions, with a stronghold in the markets of their
respective operations are included in the category of regional players. Key examples of players
included in this segment are Jaiprakash Associates (North and Central), Lafarge (concentrated in
the East), India Cement (South), Shree Cement (North), Binani Cement (North), Kesoram Industries
(South), Chettinad Cement (South), Dalmia Cement (South), Madras Cement (South) etc.
Players like Panyam Cement, Penna Cement, etc, are concentrated and operational in few states
within a region. Owing to their largely local reach, these players are classified as standalone
players.

3
Manufacturing Process



Raw materials
Limestone or chalk is used as the essential raw material in producing clinker for cement. Clinker, the
intermediate product acts as a raw material for manufacturing cement with additives such as
bauxite, iron ore, and gypsum. The quality of the product depends on the grade of limestone and
additives such as silica, alumina, and iron ore.
Fuels like coal, pet coke, natural gas or oil can be used. The industry has even started considering
the usage of alternate fuels like agro wastes, waste oils, animal meal, rice husk, etc owing to the
shortage of fuels like coal coupled with rising fuel prices. The choice of fuel depends on the
availability of fuel, its cost, the efficiency level and the process used.
Limestone benching, drilling and blasting
The extraction of the raw limestone will be switched from face extraction to sub-level benching with
gravity shaft-gallery mining system. The quality of cement is assessed and quality assurance is
obtained and compared with the standard required for making cement. This is known as limestone
benching. Limestone benching is done so that additives can be added accordingly, for qualifying the
basic characteristics.
Once the limestone is benched, it is drilled with the drilling equipment and broken into small pieces.
This is known as blasting. There are two kinds of blasting 1) Primary blasting and 2) Secondary
4
blasting. Primary blasting is the process where the limestone quarry is blasted for the first time and
limestone is broken into pieces. Usually, primary blasting suffices in making the pieces small. If
these are not small enough, a second blasting process is undertaken.
After blasting, the site is excavated and limestone is extracted. Following this, limestone is
transported to the factory for the next stage of crushing.
Crushing
Limestone is crushed and reduced to a size suitable for storage and blending. All the raw materials
are then ground in a grinder. The size of the crushed material required depends on the type of the
grinding mill used. Generally, crushing is done in two stages, in a primary crusher and a secondary
crusher. The primary crusher could be a fully mobile and self-propelled unit operating near the
quarry face, a semi-mobile unit moved at infrequent intervals, or a static unit. The secondary
crusher is a static unit and is used if required.
Pre-homogeneous stage
The crushed limestone is packed and transported to the reclaimer . This is a pre-homogeneous
stage, where additives like silica, alumina, and iron ore are added to spread it in such a way so as
to make it in uniform quality. This helps in reducing the variations in the chemical characteristics of
limestone.
Raw mill grinding
Reclaiming is followed by the raw milling stage. In the raw milling stage, the raw meal is ground into
a fine powder (so that it reacts fully) to be burnt in the kiln.
There are various types of milling systems with different equipment, namely, vertical roller mill (used
for bigger capacity) and ball roller mill (used for smaller capacity). The selection of a particular mill is
influenced by the type of raw material available, power consumed and the project outlay. Modern
milling systems use separators/classifiers, which separate the fine product and return the coarse
materials to the grinding unit.
Blending and storage
Raw milling is followed by blending and storage. Blending is done in silos. Typically, two or more
silos are used in a series or in parallel with a total capacity of at least one day's raw meal feed. The
raw meal is continuously circulated and blended in the first silo; it then passes to the second silo for
further homogenisation (perfect blending and mixing of various constituents). Alternatively, blending
and storage may be combined in a single large silo wherein the blending occurs on extraction
through a series of orifices in the base, with limited fluidisation.
Pre-heating stage and kiln
After the raw meal is blended, it is heated in a rotary kiln. In modern cement plants, before the heat
treatment in the kiln, the raw meal is heated in a pre-heater or/and a precalcinator system, in order
to ensure a higher degree of burning and enhance the product quality. Vertical cyclone chambers
5
are used where the raw material passes through the kiln and the hot gases are used to pre-heat the
material as they swirl through the cyclones.
The kiln is a refractory, lined with refractory bricks for insulation throughout its high-heat zones. The
kiln is cylindrical and marginally inclined to a horizontal position (typically with a gradient of 3-4
degrees), and rotates at 2-4 revolutions per minute. It is an important part of the cement-making
process.
The solid material passes down the kiln while it rotates. Solid material flows in the direction opposite
to the flame. Gas, oil, or pulverised coal is used to ignite the flame at the lower or front-end of the
kiln. Various processes occurring in the kiln include evaporation of water, thermal decomposition of
clay minerals (at 300-650 degree Celsius), calcite formation (at 800-950 degree Celsius), liquid
formation (at around 1,250 degree Celsius), and the formation of clinker (at over 1,400 degree
Celsius).
Clinker from the kiln passes into a cooler, where convective airflow cools the clinker for subsequent
handling and grinding. The heat is reclaimed and recycled to the kiln as secondary combustion air.
Other gases reclaimed from the suspension pre-heater (SP), precalcinator systems, and the cooler
are used as primary combustion air in the kiln. The excess air from the cooler is cleaned and
released into the atmosphere.
Clinker to cement - Grinding and blending
This phase is handled in a cement grinding mill, which may be located at a different place than the
clinker plant. Cement is produced by grinding cooled clinker with gypsum (hydrated calcium
sulphate). Gypsum and possibly additional cementitious (such as blast-furnace slag, coal fly ash,
natural pozzolanas, etc.) or inert materials (limestone) are added to the clinker. The clinker is
ground in a ball mill, which is a tubular mill partly filled with steel balls. All constituents are ground
leading to a fine and homogenous powder. The cement is then stored in silos before being
dispatched either in bulk or as bags.
Grinding
Modern cement plants use the closed-circuit system. In this system, the material from the grinding
mill is taken to an air separator or a classifier. Here, based on the particle's size, it is separated into
a 'fine product' stream and a 'coarse reject' stream. The 'coarse reject' stream is returned to the
grinding mill for regrinding. The diameter of the mill is up to 4.5 metres, with a length to diameter (L/
D) ratio of around 3. The 'coarse reject' stream is recirculated at a rate similar to that of the clinker
feed.
The closed circuit grinding system is more efficient than the open circuit system on account of the
re-circulation of the 'coarse reject' feed (resulting in lower wastage) and lower power consumption
(especially for higher compression cements). However, for OPC-33, there is no significant saving in
energy since power is required to operate the air separator and ancillary equipment, such as
elevators. The overall power consumption is 35-40 kWh/tonne of cement for open and closed circuit
6
grinding systems. In the case of cement with higher compression strength, such as rapid hardening
cement (over 400 kg/cm2), OPC-43 and OPC-53 grades, 3-5 per cent of energy is saved, as
compared to the open circuit grinding system, where the energy consumption is 55 kWh/tonne.
Vertical Roller Mills (VRM) have provided a breakthrough in the grinding process. Apart from its
higher drying capacity, the VRM draws 20-30 per cent lesser electricity as compared to the ball mill
system.
Another breakthrough in the cement industry is the application of the High Pressure Grinding Rolls
(HPGR). HPGR has been widely used in the Indian cement industry for upgrading the existing ball
mill systems. There are two basic cement grinding systems: open-circuit and closed-circuit, which
are used in HPGR. The open circuit system is found in old cement plants and mini cement plants. In
this system, the material is not re-circulated after passing through the grinding mill. The diameter of
the mill is up to 2.5 metres, with a length to diameter (L/D) ratio of around 5.5 times.





7
Cost structure

The four major costs associated with cement production are:
1. Power and fuel cost
2. Raw material cost
3. Selling expenses
4. Other expenses








8
Binani Cement Ltd.
The company manufactures and markets Ordinary Portland Cement (OPC) and Pozzolana Portland Cement
(PPC) under the Binani brand which enjoys the premium status among the Indian brand. Company
commenced operations in Binanigram after setting up 1.65 mmtpa plant in 1997. The current cement capacity
of plant is 6.25 mmtpa.
Production cost
9
Isoquant- Binani Cements
T
o
t
a
l

F
i
x
e
d

C
o
s
t
0
400
800
1200
1600
2000
Total Variable Cost
0 100 200 300 400
6.25 million 6.0 million 2.25 million

Break Even Quantity (Annually)

Long Run Cost

In long run, firm has flexibility to vary all input i.e fixed and variable input. All long run costs are variable. A long
run cost curve shows the minimum cost impact of output changes for the optimal plant size. It is the planning
curve used for selecting suitable plant size. Long run cost curves reveal the nature of return to scale and
optimal plant size.



Short run cost
Short run cost curve shows the minimum cost impact of output changes for a specific plant size and in a given
operating environment. It shows the least cost input combination for producing output under fixed
circumstances. Wage rate, interest rate, plant configuration and all other operating conditions are held
constant.

10


Cost Elasticities and Returns to scale

We have calculated cost elasticity (eC ) to measure the return to scale. Cost elasticity measures the
percentage change in total cost associated with 1% change in output.








= 44.8 / 988010 x 1375.3 / 4292089 = 0.14

If < 1 Increasing Return to scale
= 1 constant Return to scale
> 1 Decreasing Return to scale


With cost elasticity less than one , cost increase at a slower rate than output.



2009 2010
Production (MT) 4292089 5280099
988010 44.8
Total cost (Rs) 1375.3 1420.12
11