Explosives industry seeks higher prices to offset rising input costs

The explosives industry is hoping that the unprecedented crisis that it is facing due to the rising prices of raw materials will be resolved soon.

Speaking to Business Standard, A N Gupta, chairman of Explosives Manufacturers' Association of India (EMAI), said: "We are in talks with the government bodies and the companies concerned. We hope that the crisis that has hit the industry will be resolved soon." There are about 36 explosive manufacturing private sector companies, all members of EMAI.

According to Gupta, the situation turned precarious following the increase in the prices of crude oil, LHS, naphtha and natural gas globally, which are the main feedstock for manufacturing ammonium nitrate. The price of ammonium nitrate has gone up from Rs 8,600 to Rs 12,900 per tonne in one year.

Three public sector companies, Rashtriya Chemicals and Fertilisers Limited, National Fertilisers Limited and Gujarat Narmada Valley Fertiliser Corporation (GNFC) manufacture ammonium nitrate, apart from Deepak Fertiliser Limited in the private sector. However, owing to mishaps, the production of explosives by GNFC is under suspension and this has led to a major scarcity in the market.

Gupta said that the companies were losing anywhere between Rs 2,000 and Rs 2,500 per tonne of explosives supplied depending on the amount of ammonium nitrate used.

"We used to sell the explosives at around Rs 13,000 per tonne; but since the time the prices have gone up, the losses have been severe," he said.

Gupta said that the unique aspect of the explosive industry is that its feedstock suppliers are government companies and the buyer of the final product is again a government company.

"But when there is such a crisis, the government does not care about the industry and rarely increases the prices," he said.

Out of the total production of four lakh tonnes of explosives, Coal India Limited (CIL) alone consumes around 65-70 per cent.

"We met the CIL chairman as well as the Coal Secretary but no solution was found for our problem. If it is not resolved quickly, the industry will be hit very badly," Gupta said.

"We have asked for increasing the price of explosives by around 20 per cent because our cost of production is now much higher than the price that we realise from the coal companies. CIL has told us that since the contracts are annual agreements, nothing could be done and it could be raised only in the next fiscal. But we are facing a tremendous liquidity crunch because the PSU suppliers sell to us only on cash payment. We are now trying to take up the issue again with the Coal Ministry," he said.

It may be recalled that the explosive manufacturing units located at various coal mines have stopped supply between December 15 and 18 because of this problem.