The Hindu Business Line : Fall in output, rising demand push up salt prices

Kochi, Dec. 12 The steady growth in demand following expansion of capacity by chlor-alkali units, coupled with a continuous decline in production, mainly after the 2004 tsunami, has pushed up salt prices.

The shortage is estimated at five lakh tonnes during 2007. As against the total demand of 170 lakh tonnes, projected production in the country this year is 165 lakh tonnes.

The requirement of the top consumer of salt, the chlor-alkali industry, has been showing a steady rise following increase in demand for its products being a basic chemical used by several manufacturing units.

The mismatch between demand and supply has pushed up the prices to Rs 1,800 a tonne from Rs 1,000 a tonne before tsunami, Dr M.P. Sukumaran Nair, Managing Director of Kerala State-owned Travancore Cochin Chemicals Ltd (TCC), a major producer of caustic soda and chlorine in the South, told Business Line.

According to him, salt production in Gujarat is on the decline due to unfavourable weather conditions such as heavy rainfall and consequent floods. Added to this is the constant growth in demand forcing the chlor-alkali units to expand their capacities. Besides, there is no further allocation or development of new salt fields. Above all, the infrastructure for salt industry is very poor, he said.

In fact, depletion of salt cultivation lands due to development of ports, setting up of Special Economic Zones, forest and environmental problems in different States has become a major impediment to salt production. Constraints for salt lands in the country other than Gujarat, which is currently the main producer of salt, add to the woes.

Exports squeeze supply

On the other hand, potential manufacturers are not granted new leases. Besides, large quantity exports whenever demand arises have squeezed availability here. About 38 lakh tonnes of salt was exported in 2005. However, it dropped to 19 tonnes last year and projection for 2007 is 20 lakh tonnes.

Poor infrastructure

Lack of infrastructure such as roads, power, and so on coupled with restrictions on captive units are also contributing to the decline in production, he said.

The consumption of chlor-alkali products such as soda ash, caustic soda, chlorine and refined/vacuum salt, in the country was around 21 lakh tonnes last fiscal and as against this the production was 20 lakh tonnes. Besides, there were physical and deemed exports to the tune of 51,000 tonnes last fiscal. The shortfall in demand is met by imports, which stood at 1.4 lakh tonnes in 2006-07. The growth in the manufacturing sector has pushed up the demand for chlor-alkali products.

He said imports did not make any impact as the overseas suppliers cannot afford to sell below the domestic price. Besides, anti-dumping duty is also in force, Dr Nair said.

Given this scenario, other industry sources said that the government should allow captive units to sell the excess quantities to other chlor-alkali units and expand their capacities. It should also identify and allocate new leases to potential manufacturers.

At the same time, the Salt Department should monitor the demand and supply on a regular basis.

Apart from developing infrastructure for salt industry, upgrading of the salt quality by installing washeries is essential.

Reasonable inventory to sustain the natural calamities needs to be maintained besides allowing mining of salt from the Rann of Kutch to meet the shortfall, they said.