Gujarat's salt makers in a pickle

STATE UPDATE

They are the salt of the earth. But Gujarat's Rs 2,000 crore salt industry is in dire straits. For the last three years the state's salt producers have been making losses of around Rs 20 crore a year.

Some 30,000 of the industry's 100,000 workers have been laid off in the last three years. Inventories are mounting""over 10 million tonnes of excess stock exist at the moment.

As a result, in Kutch district salt is sold at a price that's lower than the actual cost of production. Also, production costs have risen to Rs 150 per tonne, a third of which is accounted by inventory costs.

Gujarat produces over 10 million tonnes of salt per annum, half of this in Kutch alone, and accounts for over 60 per cent of India's salt production.The state, approximately, has 3,000 small salt producing units and around 500 big ones.

Of these, 1,000 small units and 200 big ones are in Kutch. Eight big salt refineries that produce free flow salt, too, are located in the Kutch district.

The trouble started when the railway freight was raised by over 135 per cent in the railway Budget of 2002-2003. Thereafter, the movement of salt from Gujarat dropped by over 40 per cent, especially from Kutch.

States like Rajasthan and Tamil Nadu have gained and the figures suggest that the producers there now have an edge over Gujarat's salt units. If a railway rake is loaded from the salt fields of Rajasthan and sent to the north and northeast, the freight cost is lower by between Rs 5 lakh and Rs 8 lakh per rake than for a rake loaded from Gujarat, especially from Kutch.

Freight rates were reduced to by 15 per cent to 25 per cent in the railway Budget of 2003-2004. This year it maintained the status quo on the freight rates of all commodities.

"We suggest that the matter be taken up with the railway minister immediately and that the increase in railway freight made in 2002-2003 be withdrawn immediately to save the salt industry," Hiralal Parekh, president, Indian Salt Manufacturers Association, says.

Compounding the problem, the industry claims that the railways do not supply more than seven or eight wagons a week to transport salt, while it says it needs at least two or three wagons a day. That's another reason for salt piling up in the region. The shortage of wagons, according to the traders, has resulted in a shortage of supply to the northeast.

They argue that if the railways do not provide more wagons to Gandhidham and Chirai, a nationwide salt shortage will be the outcome.

Says Parasmal Nahata, secretary of the Gandhidham Chamber of Commerce and Industry: "On one hand, stocks of foodgrains, soya and other commodities are being brought to Kandla for export on a regular basis through trains. These wagons return empty. The railway's decision to run empty rakes from Gandhidham, ignoring the huge wagon demand that exists in the salt industry, does not seem logical and is against all commercial principles."

Vikas Patel, a leading salt manufacturer at Gandhidham, states railway rules don't permit empty wagons to be returned from Kutch, but the railways have been doing this for the past few months.

"To make matters worse, the government has introduced a rule that a truck cannot carry more than nine tonnes of salt, thus making road transport unaffordable," Patel adds.

The state's salt producers are now pinning their hopes on the government aid to export more salt. Salt was being exported from Kandla port, but owing to the higher freight cost, exports are expected to decline by 400,000 tonnes this year.

The priority berthing at the port given to ships carrying salt for export has also been withdrawn.

Says Parekh: "We have suggested to the commerce ministry and the director general of foreign trade that an export subsidy on salt be given. The government is already giving export subsidy for commodities like sugar, rice and wheat. If an export subsidy is given, the export of salt will increase considerably and the excess stocks will be cleared."