When the Father of the Nation, Mahatma Gandhi strode purposefully alongside thousands across the length of Gujarat in his historic Dandi March in 1930 to release the domestic salt industry from the shackles of the Britishers, little did he anticipate that half a century later the same salt industry -- at that time a mere 20 lakh tonnes of salt was being produced and salt was being imported to meet the domestic demands -- would end up as a Rs 3,600 crore industry accounting for the world's third largest production, averaging a whopping 14 million tonnes annually.

Salt production encompasses an estimated area of over 4.8 lakh acres spanning the states of Gujarat, Rajasthan, Tamil Nadu and to a lesser extent, Andhra Pradesh, Tamil Nadu, Orissa and West Bengal. The industry directly employs over one lakh salt labourers.

Exports: the only way out
However, despite being among the largest producers of salt in the world, India has not been able to make a dent in the international markets which is evident from the low volumes; our best export performance thus far has been a miniscule 6.66 lakh tonnes in 1990.

The Indian salt industry has been singularly unsuccessful on the export front, despite India's salt probably being the cheapest in FOB terms compared to other salt exporting countries. This is mainly due to the high trade logistic costs which leads to interminable delays in the turnaround of vessels which pushes up the CIF value of Indian salt to unacceptably high levels.

The inability of India to have a global presence is also one of the main reasons for the prevailing glut conditions in the Indian market. As the salt department deputy commissioner (Ahmedabad), M R Ansari puts it, "Since the scope of increasing demand in the domestic market is fairly limited, the only way to come out of the glut crisis is by emphasizing on exports in a big way."

Alarm bells are already ringing in the industry over the record 14.5 lakh tonne salt production in 1998-99 which is expected to burgeon to around 16-18 million tonnes in the current year. "Unless we act immediately, we may have a grave glut crisis on our hands very soon," cautions Ansari.

While a mere two per cent of the country's salt is manufactured by the 11 public sector and joint sector undertakings -- Hindustan Salt Works (Kharaghoda and Mandi), Experimental Salt Farm (Bhavnagar), the Tamil Nadu Salt Corporation and Sambhar Salts-- a whopping 98 per cent is in the hands of the private, co-operative and unorganised sector. But here again, the big corporates have a low presence with the lion's share with the small and medium units.

According to the salt department statistics, in 1998-99 there were 2,752 recognised salt units as against an estimated 6,408 unrecognised units in the country. The recognised salt manufacturers allege that these unrecognised units not only supply sub-standard salt in the market but, are also causing major revenue losses to the government by evading cess and royalty payments.

India produces more salt than its domestic requirements. These apart, the industry is also finding it difficult to keep its head above water on account of the drastic slump in demand for industrial salt by the recession-hit domestic soda ash and caustic soda industries which are the main salt consumers.

Salt’s users
Under normal conditions, of the average salt production (13.5 to 14 million tonnes), around 4.5 to 5 million tonnes is consumed for edible purposes while, 5 to 5.5 million is utilised for industrial purposes. Industrial salt is also used extensively in the chemical industry for the manufacture of plastics, glass, chlorine, soap, textiles, paints, rubber, paper and caustic soda for alumina production.

It is also used in other industries as a byproduct -- gypsum, dairy, refinery, dyeing, steel, oil, fertilisers, water softening, leather and fish curing.

Apart from being a dehydrating agent, mordant and preservative, salt is also useful for refrigeration purposes, in chemical technology and other areas of manufacturing apart from food processing. A large quantity of salt is also required to maintain the health of cattle and other domestic animals as also for producing artificial blood-plasma fluids.

Government ‘s welfare deeds
Though de-licenced in 1996, the government retains a modicum of control over the industry. It controls leasing of all Central Government land for salt manufacture along with planning the production targets.

It also supervises equitable distribution, monitors quality and prices, ensures maintenance of standards and improvements quality and promotes technological developments along with training of personnel. The salt department is under the purview of the industry ministry and is responsible for collecting the salt cess, assignment fees, ground rent and other dues.

On the welfare front, the government acts as a nodal agency for planning, formulating and monitoring development and the labour welfare schemes. It also ensures rehabilitation of the salt works affected by natural calamities such as cyclones which intermittently ravage the coastal areas of Gujarat.

Industry observers maintain that the despite lean years -- like in 1998 a cyclonic storm devastated Gujarat causing maximum loss of lives and property to the state's salt industry and the torrential rains along the Tamil Nadu coast considerably scaled down salt to 119.64 lakh tonnes as against a target of 135 lakh tonnes-- the demand and supply of salt, for edible and industrial purposes has been rising steadily over the years. In fact, the annual increase in overall demand for the commodity is pegged at a healthy 10 per cent and by 2005, the total demand for salt is expected to increase by 40 to 50 per cent.

Dire prophecies
Most in the salt industry, however, do not share the same optimism about the future of the industry. Rather, they prophesise that the sector will turn sick if immediate remedial steps to address the woes of the manufacturers are not taken. They also recommend that steps should be taken to boost the fortunes of the caustic soda and soda ash industries which are, by far, the largest consumers of industrial salt.

Salt manufacturers are quick to lay the blame for the recession in these industries on the doorstep of the government. They maintain that these industries are grappling with the dumping of cheap soda ash and caustic soda largely by China which incidentally is one of the major producers of salt globally.

According to the manufacturers, government's decision to permit free import of these chemicals paved the way for dumping of these chemicals. "And since imports are far cheaper than local production, industries using these chemicals are preferring to import them," laments an industry source.

For instance, the soaps and detergents industry has started relying totally on imports of these chemicals instead of tapping the domestic industry. "What the government has conveniently overlooked is the fact that the quality of these two products manufactured by the domestic units is equally good as the imported ones.

Therefore, there is no necessity to permit imports into the domestic market to compete with the indigenous products," he added.

Not surprisingly, the Centre's recent decision to impose anti-dumping duties on soda ash imports from China has been hailed widely by the salt industry. It is felt that the results of this measure will soon be visible in the healthier balance sheets of both the salt manufacturers and the soda ash and caustic soda industries.

It may be pointed here that the government, over the past seven years, has adopted a liberalised policy that permits easy import of caustic soda and soda ash. This, as mentioned earlier, even as the price of the domestically produced caustic soda and soda ash is considerably higher than the imported versions.

Hence, the manufacturers maintain that they are fighting a losing battle. Statistics too bear evidence to this sad state of affairs stating that over 50 per cent of the country's caustic soda units have closed down and the annual production of soda ash has slumped by 25 to 30 per cent. All this has not only adversely affected the salt-based industrial units but has also rendered thousands jobless. Soda ash production, for instance, has fallen from 16.26 lakh tonnes in 1997-98 to 14.78 lakh tonnes in 1998-99 while that of caustic soda has shown only a marginal increase of 25,000 tonnes in the same period.

Blame the power wielder
This has had a direct impact on the salt industry. Consider: for each tonne of caustic soda produced, an estimated 1.75 tonnes of industrial salt is required. With the decline in production of caustic soda and soda ash, the Gujarat Inland Salt Manufacturers Association claims that "the demand for salt by these industrial units has gone down by about 8 to 10 lakh tonnes per annum."

But imposing anti-dumping duty on soda ash is not the only panacea to the ills of the industry, according to government officials. It is widely felt that the domestic industry has done scarce little to contain the mounting domestic costs of producing soda ash and caustic soda to take on cheap imports head-on.

This uncompetitiveness against imports centres around mounting power tariffs. There is a significant consumption of power in the production of these chemicals -- for every tonne of caustic soda manufactured, around 3,000 units of power is consumed. Power bills for these industries have touched dizzy heights over the past few years.

"If we peg the cost of one unit of power at Rs 4, then the cost of power alone for producing one tonne of caustic soda is an astronomical Rs 12,000," says an industry insider. In comparison, the international cost of the product is significantly lower at Rs 6,000 per tonne. Even factoring in duties, the landed cost of imports would work out cheaper than buying from the domestic market.

Not suprisingly, therefore, many of the large caustic soda units in the country have found it more economical to set up their own captive power generation units. For instance, Ballarpur Industries (Bilt) has a captive power plant for its caustic soda unit at Karwar in Karnataka. Similarly, the state-owned Gujarat Alkalis and Chemicals (GACL) also thrives on captive generation.

What has also contributed to the slump in demand for these two chemicals is the recession in user industries such as the glass industry which is among the major consumers of soda ash. With glass units like Triveni Sheet Glass fighting to keep themselves afloat, the demand for the chemical has petered down considerably over the past few years and consequently, the prices of soda ash have been hovering at an all-time low of Rs 14,300 to Rs 14,700 per tonne over the past few months, down from Rs 15,500 per tonne between July and November, 1998.

Another reason for the dwindling domestic market for industrial salt is the belt-tightening exercises which are being conducted by the soda ash and caustic soda units which are on the look-out for quality industrial salt in order to compete with cheaper dumped products and for a standing in the export market.

Resistance to marriages
"The demand for inferior grade salt has slumped as more and more user industries are turning away and forging contracts with quality salt manufacturers," says a senior executive of a leading salt corporate. But here again, the Goliaths are up against the collective strength of the Davids in a battle for the shrinking market.

The small manufacturers are forming cartels and using strong-arm tactics to keep big quality manufacturers from usurping their markets. Rumour has it that though major users like IPCL and GACL are keen to tie up for premium quality industrial salts with big houses like Tata and Bilt, the small manufacturers of the area are resisting their entry into their "turf".

In fact, they have been threatening the companies with dire consequences since entry of the big players will sound the death knell for the smaller ones.

On the other hand, it is also felt that unless the bigwigs enter the user industries in a major way and exports improve significantly, the market for industrial salt will continue to stagnate and even dwindle further. But here again, though the Ahmedabad-based detergent major Nirma Industries has firmed up plans for setting up a Rs 1,000 crore soda ash unit with a daily capacity of 1,300 tonnes raising hopes of being a major consumer at least for the next couple of years till its own salt works become operational, the hopes of the industry have been dashed even before the project has taken off.

Both the small and big manufacturers who were expecting buoyancy in the market have summarily been told to keep their hands off by the local manufacturers. "What is surprising is that there is no demur from Nirma which will be forced to use inferior grade industrial salt which will result in additional purification costs for it," bemoans the executive of an affected party.

Royalty woes
The salt manufacturers are also up in arms against the recent implementation of the resolution by the Gujarat Government's department of industries and mines to increase the rate of royalty from Rs 3 per tonne to Rs 8 per tonne - an increase of 266 per cent.

The state manufacturers are objecting to this stiff hike in royalty which according them will squeeze their operating margins even further. This, they aver, is because the cost of production of salt differs from area to area, geographical conditions, availability of brine, inadequate infrastructure, managerial availability, financial conditions and proximity to labour areas. In view of all these factors, they feel that "cost of salt production cannot be taken as the base for increase in royalty."

Manufacturers in Gujarat particularly point out that with the state producing more than 70 per cent of the country's total salt produced, any increase in the royalty rates will only adversely affect the nationwide scenario of salt production.

Prior to the recent increase in royalty rates, less than two years back the Gujarat Government had increased the rates from Re 1 to Rs 3. "The earlier 200 per cent increase combined with the 266 per cent increase now will break the backbone of the industry in the state. Specially since it will directly affect our selling price," bemoans a salt manufacturer.

The government on its part justifys the hike in royalty rates stating that it is only the second upward revision in the past sixteen years.

But, according to industry observers it is definitely on the higher side compared to the miniscule royalty rate of 0.33 per cent in Rajasthan and 0.525 per cent in Tamil Nadu the other two important salt producing states. The royalty component for Gujarat works out to a high 4.06 per cent.

On the edible salt front
The scenario on the edible salt front is not so grim thanks to India's burgeoning population. "To some extent, decrease in demand for industrial salt is being nullified by the increase in demand for edible salt," quipped a leading salt manufacturer of Gujarat. An individual's annual requirement for salt has been pegged at 6 kg. Taking the country's present population at 100 crores, the requirement for edible salt would be 60 lakh tonnes per annum.

Despite a burgeoning population and the corresponding increase in the demand for edible salt, it is clear that on the industrial salt front, the industry has heavy odds stacked against it. As an industry observer sums up,"What we need is not only large markets within the country only but outside too.