Dungsam manufacturing only at limited capacity since January as three major parts breakdown

Hydro project contractors shift back to importing cement from India due to erratic supply issues

Dungsam Cement, for quite some time fought a long and hard battle to get mega project contractors to buy cement entirely from them and succeeded in doing so.

However, this time around the very plant machinery used to manufacture cement is letting the company down with the breakdown of three major parts.

This has lead to an erratic flow of supplies to the major hydro project contractors like Larsen and Toubro, Jai Prakash, HCC and Gammon who are working on the Punatsangchu I, Mangdechu and Punatsangchu II projects.

As a result these major contractors have again started importing cement from India.

Punatsangchu Hydroelectric Project Authority (PHPA) Managing Director R.N Khazanchi said, “The contractors have told us about erratic supplies from Dungsam Cement and as a result they are relying on cement from India.” He said that this had been problem especially in the last one month or so.

Dungsam Cement CEO Dorji Norbu said that due to the problems given by the three parts, the company, on an average was manufacturing only at 50 percent of its capacity since 1st January 2015.

He also admitted that there had been short stretches of a few days where no cement could be manufactured. The longest was in early May when there was no cement sent to the project site for a period of around five days.

The CEO claimed that given Dungsam Cement had a total production capacity of 4,130 metric tons a day it’s 50 percent production meant it was still enough to cover the combined hydropower needs of 800 metric tons a day.

However, hydropower construction companies faced with erratic supplies have decided to opt for importing cement.

Dorji Norbu said that the problem should be fixed when two remaining parts arrive by mid-July as one part had already come. However, the entire factory will have to be completely shut down for a period of at least around two weeks for the three new parts to be installed.

The parts in question are two ‘Process Fan Impellers’ each of which weigh 90 metric tons and the third part is a ‘Rotary Air Lock’ weighing around 98 kg.

The CEO said that unless all the three parts were changed the problems at the plant would continue.

Unfortunately none of the three machines can be replaced for free as the warranty period expired a long time ago since the machines had come on time but the factory complex had been considerably delayed.

Dorji Norbu said that in fact the prolonged storage of the three parts led to humidity going into the machines and causing problems in them.

The three parts were originally bought from Humboldt a German company which supplied the main machinery for the plant. The order for the new parts has also been placed with the same company given their familiarity with the parts.

A Process Fan Impeller is a huge machine that has suction power which is used for the manufacture and delivery of cement. It is also used to handle large amounts of dust and heat. The Rotary Air Lock is an open mouth device into which raw materials is fed for grinding into dust.

Dungsam Cement is already forecast to make a loss in 2015. The CEO admitted that the limited production since January will further hit the revenue of the company. Though the company said they were still working on the costs and negotiations of the new replacements they are expected to cost a significant amount given their size and functions.

The CEO said that Dungsam will aim to cover up after October 2015 onwards for the preceding months.

After much delays (22 months) and cost overruns Dungsam Cement had started production commercially from early 2014 but soon faced problems with hydropower contractors importing from India and the North East India market getting more competitive with additional Indian capacity and subsidies.

Dungsam with the intervention of the government and DHI had just managed to convince all major hydro project contractors to purchase solely from it when this problem occurred.

Dungsam has so far floated three bonds collectively worth around Nu 3.4 bn mainly subscribed by Financial Institutions. Dungsam also borrowed Nu 530 mn from Druk Green Power Corporation at five percent interest.

Dungsam was constructed at a total cost of around Nu 10.5 bn and was aimed at both the ‘unlimited market’ in India and also the 10,000 MW projects.

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