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Penden Cement Authority Ltd. (PCAL) earned a net profit of Nu 183.7 million in 2001²about Nu 13
million more than the previous year²defying bleak market forecasts and stiff competition.

The report of the chairman of the PCAL board stated that the
profit was earned even as cement price started dipping in the
Indian market during the fourth quarter of 2001.

About 50 percent of PCAL cement is sold in India.

The beginning of 2002, however, did not look as promising. The

price failed to rise despite rife speculation and the strategy used
by Indian cement manufacturers to cut back production.

³This strategy (production cutback) came against stiff resistance

from the construction industries with contractors resorting to non-
procurement of cement at the artificially buoyed pricing,´ the
report said.

The chairman¶s report also warned of the impact of the

consolidation of cement industries which was gaining momentum.
Global cement manufacturers had come to India with ³huge long
range strategies to wipe off competitions and eventually acquire
as many industries as possible´. ³Because of their planned large
scale of production worldwide, they are able to absorb losses
arising due to self-induced price cuts, and this price war could go
on for year,´ the report stated.

M/S. Lafarge, one of the major multinational players in India, was

following the ³high volume low price´ philosophy besides which
the government of India had announced reduction in customs
duty on cement import to control domestic pricing.

The report said that PCAL had troubles closer home, too. Two
huge grinding units, M/S Gujarat Ambuja in Sankhrail Kolkata and
L&T in Durgapur, had come up with a capacity to produce a
million metric tonne each.

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Penden Cement Authority Limited (PCAL)

has announced an increase in its factory
cement price by Nu 150 a metric tonne to
keep itself abreast with the price trends
in the Indian market.

A metric tonne of PCAL cement will now

cost Nu 2,510, in both domestic and
outside markets.
According to the joint managing director
of the company, Dorji Norbu, the price
has to be at par with India¶s because of
PCAL¶s dependence on the Indian market.
At times, more than 50 percent of the
company¶s cement is sold there.

Last year, PCAL sold about 130,000

³Through acquisition of metric tonnes in India and 160,000
stakes in one another, metric tonnes in Bhutan. The Indian
the cement markets sometimes absorb as much as
manufacturers are 70 percent of PCAL¶s turnover, especially
combining forces and during road blocks in Bhutan. The
are headed for cross- company¶s total production averages
branding of products,´ 30,000 metric tonnes a month.
the report said. ³ACC
and Ambuja combine The present price rise, however, is not
and Grasim and L&T drastic and it should not in any way have
combine have already a ³significant´ impact on consumers and
set the ball rolling to their businesses, according to Dorji
storm the markets in Norbu.
the region.´

³It¶s just a nominal hike,´ he said. ³There

The situation in the is only an increase of 6.36 percent which
region was exacerbated is not very much.´
by smaller grinding
units in North Bengal
and Assam which are ³In any case, our domestic consumers
able to sell at lower are used to our price fluctuations. In the
rates because of sales peak season it goes up and in the lean
tax subsidy provided season it comes down,´ he added.
by the respective state
governments. The price per bag of PCAL cement,
including the five percent BST, ranges
The report said that from Nu 143.58 in Samtse to Nu 246.43
PCAL must be ³geared´ in Lhuentse. The difference is caused by
to absorb the short transportation, godown, incidental and
term & long term other charges included in the price
shocks of ³such fierce depending on how far a place is located
under-cuttings´. from the factory in Gomtu.

³To withstand the But the agents are ³not allowed´ to

onslaught of the fierce increase the price beyond what has been
competitions´ in the fixed by the company and announced in
market, PCAL was the national media, said Dorji Norbu.
undertaking, among
other measures, Dorji Norbu said that PCAL faces tough
studies to add competition outside Bhutan. PCAL is the
additional capacities in only cement factory in Bhutan that
areas of clinker utilizes, on an average, 105 percent of its
production and cement capacity and produces about 950 metric
grinding to facilitate tonnes everyday. The rest of the factories
production of higher in Bhutan produce below 200 metric
volume of blended tonnes.
cement. And a
marketing strategy was being drawn to market a bulk of the
production in Indian markets.

A project to optimise the rotary kiln capacity at PCAL and raise

clinker production to 200 metric tonnes a day is scheduled to be
complete by the end of this month.

PCAL produced 257,135 metric tonnes of clinker (as against

246,140 MT in 2000) and 290,324 metric tonnes (263,234 MT in
2000) of cement in 2001.