Back on December 15th, Adani Group owned cement companies ACC Cement and Ambuja Cement shut down their plants in Himachal Pradesh over a disagreement on freight rates. Back then, the Adani Group said that the truckers’ unions must agree to run 50,000 km a year, reduce deployment of vehicles to 550, and leave all operational decisions to the company, for it to restart production.
Two months later, the decision to shut down the plants at Barmana in Bilaspur district and Darlaghat in Solan district in Himachal Pradesh, continues to jeopardise the livelihoods of thousands of truckers who are left without work. Shutting down of the cement plants has also hit mechanics, dhaba owners and other people associated with the business. Truck owner Bhaghi Rath said the truckers are losing Rs 2,000 and Rs 3,000 per day.
“Truckers who have no other income and have to repay loans are the worst hit,” said Ram Lal, a truck owner
According to the officials of the state government, transportation costs take into account 11 factors including taxes, insurance, depreciation value, repair, and wages. Dividing this by the distance covered by the truck (in km) and the weight it carries (in tonnes), the average cost per tonne per km (PTPK) is calculated.
Adani Cement CEO Ajay Kapur said earlier that the unions, who actively decide the prices, have been keeping the freight rates extremely high and and making all transport related operational decisions that belong in the domain of companies. The Adani Group is learnt to have offered Rs 6 PTPK, against the existing rate of Rs 10.58 PTPK for ACL and Rs 11.41 PTPK for ACC. With truck operators refusing to accept this, the group shut down the Ambuja plant at Darlaghat and ACC plant in Bilaspur.
Adani’s competitor, Ultratech Cement also has a plant in Baga near Adani’s plants, and is offering freight rates of Rs 10.58 to Rs 10.71 per tonne per kilometer (PTPK). While the unions are demanding Adani Group to keep their pricing competitive, the latter has proposed its own framework for deciding freight rates, citing the need for due diligence and intervention
“We were forced to close our operations after the transport unions adopted an unworkable position on the freight rate and distribution model,” Ajay Kapur, the CEO of Adani Cement
Kapur suggested the the optimum distance per annum to be set at 50,000 km, along with reducing the currently employed fleet of 3,311 trucks to 550 trucks (for both ACC and Ambuja), both gradually over the next couple of years.
The Adani Cement executive further said that trucks in Himachal Pradesh travel just a fourth of the national average of 100,000 kilometres and this inefficiency is inflating the freight rates. Moreover, the unions also prevent companies from operating their own fleets, restricting the creation of a free market.
However, the truckers’ unions said that Kapur’s suggestions are against the welfare of the truckers. Jai Dev Kaundal, head of the truckers’ association in Solan said that the average distance a truck covers in a years is 21,000 km and if the cost PTPK is calculated based on Kapur’s estimates of 50,000 km, it will be much less than what it should be. He also said that the unions will accepts the report of the HIMCON.
“Hundreds of people had given their land for construction of the cement plant but were neither adequately compensated nor provided direct employment. They bought trucks as an avenue of indirect employment but shutting down of the cement plant has hit their livelihood hard,” said Ram Kishan, the truck union president at Darlaghat
The state government has also set up a sub-committee to resolve the issue and tasked HIMCON, a state-owned agency, to calculate the freight rates on the basis of a formula proposed by the High Court. The recommendations of the HIMCON report are not known yet. The sub committee was set up a week after Adani Cement closed the two plants. It is chaired by RD Nazim, Principal Secretary, Industries Department.
Due to the closure of the twin plants, the state is incurring a loss of Rs 2 crore per day, said Industry minister Harshvardhan Chauhan on Tuesday, implying that in the past two months the loss to the state exchequer has mounted to Rs 120 crore.
