New Delhi, December 16, 2005: The cement industry, the country’s second largest excise duty payer (after tobacco industry) and potentially very polluting, has been awarded the Three Leaves Award by the Centre for Science and Environment (CSE). This sector, which has major environmental impacts, has received higher marks than the three sectors rated previously by CSE – pulp and paper, chlor-alkali and automobiles. The top company -- Madras Cement Limited’s Alathiyur Works -- has been awarded the prestigious Four Leaves Award; it is the first plant in India to receive this award.

The sector has scored high because of the initiatives it has taken to reduce its air pollution and the fact that it is today one of the world’s most energy-efficient cement producers. But while the industry has earned credit for reducing energy use and pollution, it has been indicted for its bad mining practices. The fact is that the Indian cement industry spends as little as 4 per cent of its turnover on the cost of its raw material – limestone. The mining of this resource is leading to huge environmental problems, including the depletion of groundwater for local communities.

Market leaders bad
Worse, the rating finds that the market leaders are not the environmental leaders. Grasim Industries Limited of the Aditya Birla group, which has 22 per cent of the market share of this booming industry, was rated mediocre by CSE. The next biggest cement company, the prestigious Associated Cement Companies (ACC) Limited, now jointly owned by multinational Holcim and the Indian Ambuja Group, scored less than 35 per cent marks as a group. However, the group’s Gagal plant located in Himachal Pradesh saved the day as it was rated the third best plant in the country. The privately-owned India Cements Limited, the fourth largest cement seller in the country, was given the lowest rank. Global cement leader Lafarge could only manage the sixth position.

The rating
The ratings, the first of their kind for this sector, have been done by Centre for Science and Environment’s (CSE) Green Rating Project (GRP), and were released by eminent scientist Dr M S Swaminathan. The rating is a public tool to push industries to improve their environmental performance. In this rating, GRP selected 41 production plants of 23 major cement producers, spread over nine states of India. These companies represent about 80 per cent of the total production capacity in the country -- and their performance, therefore, is representative of the entire sector.

The Gujarat plant of Gujarat Ambuja Cement Limited bagged the second spot, while the third spot was shared by three companies: J K Lakshmi Cement Limited, Prism Cement Limited and ACC’s Gagal Cement Works (see table: Environmental performance of Indian cement plants).

Good news: energy efficiency and global warming
The rating has found that energy is the biggest production cost of the sector and Indian companies have done everything to reduce this cost. They have modernised their technology and have focused on producing more blended cement. According to GRP’s assessment, the Indian cement sector is (after Japan) the second most energy-efficient cement sector in the world.

GRP also found that the emission of carbon dioxide – which causes global warming – from Indian cement companies is significantly lower than European and American cement companies. "This is an important message to give out to the developed world, where the general feeling is that India is not doing enough to combat global warming," says Chandra Bhushan, head of the GRP and associate director of CSE. In industrial sectors, cement industry is the second largest emitter of carbon dioxide and accounts for 5 per cent of global human-made carbon dioxide emissions.

Fly ash: can help in waste management
The cement sector holds immense promise in terms of utilising wastes from other industries: fly ash (from the power sector) and blast furnace slag (from the iron and steel industry) are both used to manufacture blended cement, without sacrificing the quality of cement. The use of these wastes also enables cement companies to increase their profits. Consequently, about 53 per cent of the total cement produced in India is blended cement. Today, about 12 per cent of total fly ash generated in India is used by the cement industry. "But the potential for utilisation is much more," feels Sunita Narain, director, CSE. "If all cement produced in India was to blend 30 per cent fly ash, the industry would utilise as much as 40 per cent of the total fly ash generated and solve a major waste disposal problem."

GRP also found that fly ash blended cement is suitable for most construction activities. But to compete in the market, industries want to sell their cement as "strongest and whitest" which then makes them discount the potential of using fly ash. "It is unfortunate that we are selling cement as a new cosmetic; this is making it more environmentally unfriendly," says Bhushan.

Bad news: very poor mining
The rating also had some bad news. The industry has performed poorly where it had no economic returns. "Cement industry’s better environmental performance in energy and waste utilisation is not because of environmental concerns, but because of better economic returns," adds Sunita Narain.

A major problem area of the sector, points out the GRP study, comes from the way it sources its raw material: mining limestone. GRP found major environmental problems due to poor mining practices of the cement industry. "Since all limestone mines are captive mines of cement plants and mining regulations are poor, cement industry is not investing in mine management," says Bhushan. In fact, the overall sector score for mining is only 24 per cent, compared to 50 per cent scores in areas in which the sector has done well, such as technology and energy use.

The regulations on the location of mines are so poorly implemented that many mines are located close to wildlife centuries and reserve forests. There is a rush to set up cement plants and mines in Himachal Pradesh. GRP found that 44 per cent of the mines it assessed were located in ecologically sensitive areas. Mines have breached groundwater table and led to acute water scarcity in some places. Understandably, local communities have been up in arms against the sector. "Lax and completely ineffective regulations are really to blame for this state of affairs," says Chandra Bhushan. The study, therefore, recommends strong regulatory control over the sector.

To begin with, suggests Narain, regulators can do away with cheap mine leases and provide incentives for good mine management and disincentive for poor management. The economic benefits of mining must also belong to local communities, whose resources are exported by the sector, with little in return.

The GRP study points out that while the cement industry does not fit the definition of a "sustainable industry", an "acceptable trade-off" can certainly be proposed. What the study attempts to do is to benchmark the companies’ performance against such a trade-off.