India - Cement Industry Project

 Cement industry project Report No: ; Type: Report/Evaluation Memorandum ; Country: India; Region: South Asia; Sector: Other Industry; Major Sector: Industry; ProjectID: P009914 June 14, 1995 India: Cement Industry Project (Loans 2660-IN and 2661- IN) This project was designed to assist the Government of India in its efforts to gradually liberalize the key productive sectors by enabling the cement industry to: (i) modernize its facilities; (ii) introduce more energy efficient technologies, thereby reducing costs; (iii) train the workforce; (iv) meet environmental standards; and, (v) generally improve its efficiency and competitiveness. The Bank approved simultaneously two loans in March 1986 for the implementation of this project: Loan 2660-IN for an amount of US$165 million to the Government of India; and Loan 2661-IN for an amount of US$35 million to the Industrial Credit and Investment Corporation of India (ICICI). Owing to the withdrawal of three pre-appraised major subprojects (out of a total of seven envisaged in the project) and the subsequent appraisal of five replacement subprojects, the closing date of both loans was postponed by two years, from June 30, 1992 to June 30, 1994, at which time an undisbursed amount of $3.6 million was canceled. At the time of preparation of the Implementation Completion Report (ICR), all but two of the major subprojects financed through Loan 2660-IN had been completed and the respective plants were operating satisfactorily at the expanded capacity and with lower costs. The other two subprojects (KALYANPUR & IDCOL) initially faced financial problems before the owners and financial institutions embarked on restructuring plans. Even though the modernization of both plants was proceeding well, the delay in implementation and the adverse impact of Rupee/US$ parity is likely to result in a reduction in the rate of return of these two operations. The study on training needs of the cement industry was completed and resulted in a program to set up 4-6 regional training centers, especially for the training of trainers. The ICR contains operational plans for many major subprojects. The Operations Evaluation Department (OED) agrees with the ratings in the ICR for Loan 2660-IN, except that, due to the delays in subprojects at KALYANPUR and IDCOL, it rates the outcome as satisfactory instead of highly satisfactory. Institutional development impact is rated as substantial. Sustainability appears likely, given the decontrol of the cement market and prices, liberalization of imports, and the intrinsic competitiveness of the Indian cement industry. The ICR provides no information on the twenty smaller modernization subprojects which benefited from Loan 2661- IN. The Borrower's contribution indicates that demand for the loan was initially poor, but increased after the Government agreed to take the foreign exchange risk. In the absence of pertinent data and indicators, it is impossible to come to any meaningful rating on the outcome of this loan. Hence, an audit is planned.