19.01.

2011

M.S.P RANI SECTION- A R NO: 1226110118

INDIAN GRANITE INDUSTRY Abstract

India accounts for over 20 percent of the worlds resources in granite. Indias market presence and quarrying operations are characterised as relatively small in scale, with a low level of mechanisation and labour intensive when compared to countries like Italy, Brazil, Spain, China and Turkey. Quarrying operations are unorganised and of informal nature subject to many constraints. The industry in the last 3 years took a setback hit hard by the recession in developed countries which constitute major granite importing countries from India leaving the exporters to seek fiscal relief from the government. Indian granite faces competition from China, Brazil and Turkey who are selling their stones at 1/3rd price of India granites in the global market. Indian granite exporters face this competition by way of offering attractive designs and articrafts to attract orders. Granite is a major contributor in foreign exchange earnings. India is the second largest exporter of raw granite after China and ahead of Brazil and South Africa. The Indian granite industry has been growing steadily at an annual rate of around 10% per year since 2001-02. However, Indian granite exports have declined 33 per cent between 2006-07 and 2008-09 as a result of the the sub-prime crisis. The value of granite export from India was Rs 2,738 crore in 2008-09, compared with Rs 4,086 crore in 2006-07. In 2007-08, the export value stood at Rs 3,367 crore. In terms of volume, the country exported 30 lakh tonnes of granite in 2008-09, compared with 31 lakh tonnes in 2006-07. In 200708, it was 34.12 lakh tonnes. The nerve centres for granite trade are the states of Karnataka, Rajasthan, Madhya Pradesh, Jharkhand, Andhra Pradesh and Orissa. The decline in export earnings and volumes was more pronounced in 2008-09. Export fell 18.7 per cent in value terms, while volumes were down 12.1 per cent.

Introduction
India is endowed with a variety of granite deposits. Granites are widespread throughout the Archaean terrain. They occupy wide areas in many states in the country and State wise breakup of resources reveals that Karnataka with about 25% resources is leading followed by Jharkhand (24%), Rajasthan (23%), Andhra Pradesh (6%), Madhya Pradesh (5%) and Orissa (5%) which together accounted for 88% resources. These states are blessed with extraordinary rich varieties of extensive deposits. India is not only endowed with vast quantities, but also has more than 160 known varieties of granite. Out of these, at least 30 varieties have established permanent markets in different countries and represent a wide spectrum of colour, texture and structure. Karnataka specialises in the production of Ruby red, Kanakpura multicolour, Himalayan blue and Sira grey varieties of granite. Andhra Pradesh

is famous for Black Galaxy, Srikakulam blue and black varieties of granite while Tamil Nadu is abundant in Jet-black and Tippu-white, Kashmir-white and Paradiso varieties of granite. Indias riches in stone deposits have helped in the growth and development of domestic granite processing industry. The dimension stone industry employs over one million work force. This industry plays a vital role in the economy of states like Tamil Nadu, Andhra Pradesh, Karnataka and Rajasthan. Indian granite exporters have significant strength across the value chain and have evolved into the production and manufacturing of blocks, flooring slabs, structural slabs, calibrated ready to fix tiles, monuments, tomb stone, sculptures, artifacts, etc. Market Demand and Export Potential India has one of the best granite deposits in the world. With a varied diversity of more than 200 shades, India accounts for over 20% of the total granite reserve across the world. The total granite reserves in the country are estimated around 42,916 million cubic meters and it is one of the largest exporters of granite and granite products in the world. There is a niche market emerging for domestic players, that of value added products like sculptures and artifacts. The Granite industry is on a path of rapid development owing to the skilled craftsmen of granite memorial and monuments coupled with the availability of rare colours like black galaxy and premium grade granite in our country. Labour in India is cheaper than in Europe, though the fact that the industry falls under the Factories Act means the workers in this industry are highly unionised with privileges like social security payments, provident fund, compulsory holidays, etc. There is a high demand for Indian stone sculptures and articrafts with India being ranked fifth in the world for the export of processed (value added finished) product and the Indian monuments are being supplied to more than 25 nations throughout the world. Granite reserves in India have now been estimated by Indian Bureau of Mines at over 42,916 million cubic metres. The processed material that is produced for export purpose can be taken as the actual output level in the country in addition to 5 to 15% produced for internal use. India is among the leading granite exporting nation holding no.1 rank as a largest granite and granite products exporter. The total granite exports have seen a constant upsurge due to rising demand in the international market. On average over ten percent of the natural stone traded on the world market comes from India. The annual export growth rate has been around 10 to 15 percent over the last two decades, although in the recent years the export role of India has stagnated somewhat due to the rise of China which successfully adopted a cluster approach for developing its granite and monument
[1]

stone industry. Sending a container from China to the United States costs between $600-800, while the corresponding cost in India would be anywhere between $1,800-2,600. The key export destinations for Indian granite manufacturers are Japan, the USA, the UK, Germany, the Netherlands, Italy, China, and Taiwan. The U.S is the biggest consumer of Indian granite with a share of 24% of total export, followed by China (19%) and Italy (8%). Further due to increasing environmental pollution and increasing incident of acid rain in various part of the world, granite has replaced marble as a material of choice for monuments and other similar structures due to its high durability and aesthetic touch. The changing preference has been a key contributor to the rise in demand of granite both in the Indian domestic and the international market. [4] The granite industry received a wider publicity and corporate importance, only in the last few years with Export Promotion Councils like CAPEXIL imparting professional training to exporters and the industry is now emerging a thrust export area with several export oriented corporate houses which are making the industry an organised one. Impact of Recession The Indian granite and natural stone industry is in dire straits as the global economic recession took its toll in the last three years. With its major market being U.S, the industry was badly hit by recession. In the year 2009, some 300 units in Hosur, Bangalore and Hyderabad were near to shutting down their quarrying and manufacturing operations. Whereas in Tamil Nadu, the Granite hub of India, around 30 quarries (of the 165) were closed due to lack of orders. There was a severe loss of revenue and profits which was estimated at Rs 800 crore less than in 2007-08 (Rs 6,071 crore). Granite importing countries such as the US, China, Italy have reduced their requirements as a result of which Indias granite and natural stone exports went down by 15-20 per cent in the year 2009 . Tamil Nadu Granite Quarry Owners and Exporters Association claims that five years ago, nearly 70 per cent of granite export was rough blocks and 30 per cent was finished product but the situation now is completely reverse. The US and European markets have been badly hit, while there is still demand from China for granite blocks. For example, Devinarayan Exporters Ltd. had to reduce its price by 25-30 per cent. The demand from US is down by 50 per cent; the demand from China and Europe has dropped by nearly 30 per cent.[5]

Export Performance The export of polished granites blocks and slabs more than halved in 2008-09 at 2.75 lakh tonnes compared with 5.52 lakh tonnes in 2007, while in 2007-08 it was 4.13 lakh tonnes. Export revenue in this segment declined 51.9 per cent more than the sector as a whole to Rs 862.63 crore 2008-09 from Rs 1,791.98 crore in 2006-07. In 2007-08, it was Rs 1,332.56 crore. The sharp drop in exports has led to a reduction in mining activities, and also factories are running at below capacity. As the major export markets for granite, US and Europe are facing a credit crunch, payments have also become irregular in the industry. [7]

Business environment :
Indian Granite industry is highly capital intensive as it requires heavy investment in import of machinery especially expensive quarrying machines and gangsaws. It is also labour intensive as it involves quarrying operations and customised designing in granite Articrafts and gravestones. Although our country more than 100 varieties of granite as against about 400 varieties presently available in the world, it is not in a position to have a sustained market due to several policy constraints and vulnerable external environment. Some of the major constraints and challenges posed to Indian Granite industry are: Central and state government policies One of the main business constraints in the industry is due to the inconsistency in mineral and mining policies of the Government, together with political interference in mining lease and other procedures. Granite is a 'Minor Mineral' under the Mines and Minerals Development and Regulation Act (India) (MMRDA) of 1957. The Central Govt. have framed the Mineral Concession Rules 1960 for regulating grant of reconnaissance permit for aerial survey, prospecting licences and mining leases in respect of all minerals other than atomic mineral and minor minerals. The State Governments grant the reconnaissance permit, prospecting licences and mining leases. Every Government, which is coming to the power, interferes with the mining policy, and changes, quite often, the leasing procedures. Various state governments adopt policies in the matter of granting leases of Government owned quarries, transport facilities and the like. Each State differs with the other in these matters and has many drawbacks. It is being repeatedly brought to the notice of the authorities both Central and States and other forums connected with exports regarding these anomalies and hardships that the granite industry is facing today in our country.

Chronic granite leasing problems together with difficulty in transporting bigger blocks are the major hurdles for the healthy growth of Indian granite industry. This industry being capital intensive is not being allowed certain concessions such as income tax payment exemption on export of Dimensional Blocks and finished products like Monuments, Slabs and Tiles. One of the main problems seen in the Indian granite industry is that of payments of 12.5 per cent service tax on the commission paid to agents abroad for getting business. The agents are willing to get 3-4 containers of business every month on a 10-12 per cent commission. The exporters need to give competitive price and work at 5 per cent margin. Moreover, the tax to the government erodes the margin. In many states especially Andhra Pradesh, the State Government is charging royalty of Rs 750 to Rs 2,250 a cubic metre for different varieties of granite. Granite exporting companies from the state such as MSP Granites, Sterling Stone Exports Pvt Ltd, Golden Rocks and Madhucon Granites Pvt Ltd are in great distress and they contend that unless the State understands their plight and reduces the taxes and royalties and the Union Government offers some export incentives, their survival may be difficult.[6] Lack of advanced technology and infrastructure Another reason for hampering faster growth of granite exports from India is lack of availability of advanced technology in mining and usage of modern mining machinery. India imports gang saws and tiling plants, circular saws for granite and polishing machines especially from Italy. Quarrying equipment like pneumatic jackhammers, diesel-powered compressors, hydraulic jacks, splitting equipment, winches, excavators, and air pillows are now being produced in the country but do not act as a substitute for the import of same. There is a void in the production of epoxy resins, as well as finishing and polishing compounds. The machinery being produced in India involves a low- to medium-level of technology, with most of the controls being handled manually rather that with CNC automation. The absence of a proper infrastructure is another deterrent. Though some of us can import the required machinery, we do not have good roads and enough sea ports to handle the material. For example, Granite slabs are mostly exported from Chennai and Kandla ports whereas other ports are not equipped to handle the same. [8] Domination of Big players The sphere of control and authority of big business houses over the export of premium varieties of granite has been another threatening factor to small and medium scale operators in the stone sector, who lack the capacity and capability to complete with big players. Some of these big companies have

acquired quarries as early as 1972 and this has enabled them to export around 40% of the premium quality. Such companies are enjoying a higher profit margin. The small and medium scale entrepreneurs are left in the lurch, as they do not find it economically viable to own or take on lease a quarry. If state-of-the art quarrying equipment, which is not available in the country, is to be imported from abroad, it would easily cost several lakhs and it is a burdensome investment for small and medium scale businessmen. [3] High interest rates Banks are offering manufacturing industries like granite, loans at very higher interest at around 1415%. Due to this, the manufacturing industry may suffer. Practice of free allowance: Free allowance in India initially started with 5-7 cms which has now grown into about 15-30 cms, based on which it was found that almost 50% of the Material is being exported freely. This sort of malpractice fostered by some of the quarry owners is leading the industry towards a downward trend. India lost more than 50% of its market in Japan due to this practice. The Indian quarries equipped with technologically advanced machinery for precise cutting, of the blocks using diamond wires, etc., should restrict the free allowances. Declared forest areas Many Indian exporters complain that for many of the mines leases were granted. But still they remain inoperative due to the declaration of Forest Area. However, in the area which has been taken out from the mining by the forest authorities, no wild life is traceable and no forest cover exists either. There is a need for a suitable policy to be evolved by the Ministry of Forests and by the Ministry of Mines because mineral deposit is only specific to a region, but forest areas could be developed anywhere. [4] Lack of appropriate incentives: The industry is not getting the duty drawback of tax incentives for the capital goods invested, machinery, consumables and accessories used for mining. Almost 25% of the value of the imported machine is covered in the form of taxes. Though capital goods can be imported with a lower duty under the EPCG Scheme or E.O.U Scheme other taxes like Excise Duty, Sales Tax, etc. add to the cost of the machine. For lubricants like diesel and other imported consumables/accessories like the diamond wires, the same condition prevails and exporters are also paying royalty and dead-rent,
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which are declared as taxes by the Supreme Court. Granite is treated as a minor mineral and royalty rates are fixed by state governments at levels which are 500-1,000 per cent higher than in China resulting in higher costs. In case of Japan and the U.S the royalty payments are negligible or do not exist. Social and Environmental Challenges: The quarrying and processing of natural stone is characterised by major social and environmental problems. Problems include bonded labour, child labour, hazardous and unfair working conditions and a series of environmental issues such as land degradation. Child labour is common in Indias Granite stone quarries with children working in quarries long before they reach the age of 14 and are often made to perform hazardous tasks violating the law. Discrimination is very much an issue in the industry where most workers are low caste migrants who are looked down upon by their employers. Legal limits to working hours are not respected in this industry and hazardous working conditions are common. Workers are exposed to a high incidence of fatal occupational diseases such as silicosis and tuberculosis. Irresponsible solid waste disposal by quarries and processing plants is a frequently occurring phenomenon, causing severe damage to agricultural areas violating national environmental laws. Also corruption is an important feature in many Indian companies and in public life, and Indian Granite industry is no exception. [6] Chinas threat China has taken advantage of cheaper raw material from their own country, faster deliveries to the factories for processing with better roads, good transport system and faster processing due to efficient labour with low investment and cheaper capital etc. The Chinese used less expensive manually operated machines for producing monuments as against heavy investment made in India and other countries. With the advantage of economic reasonable worker wages and lower power tariff and cheaper interest on funding, there was a great boom in Chinese granite industry. There is a total integration of stone technology, manpower, machinery, consumables and accessories unlike in India. Chinese market has expanded to the USA, Canada, Europe, Australia, New Zealand, Singapore etc. The large number of imported granite blocks normally seen in plenty in Italy, Japan, Spain and to some extent in Germany and France could now also been in China with a visible difference. China has simplified import procedures, no red-tapism, fixed lower import duty structure and duty refund system and all encouragement for export productivity and all these facilitation have catapulted China to become global stone power. China has emerged as a serious contender and ranks no.1 in import of granite blocks from India. [2]
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Conclusion
The growth of Indian granite industry over the years has been steady and impressive, both in terms of volume and value. Despite the travails and tribulations of quarrying, global recession and competition - both domestic and international- the sustained growth of the industry recorded thus for is a matter of satisfaction. The Government's focus appears to be only in granting leases and in setting up of factories where as key areas such as development of infrastructural facilities and upgrading of mining technology are not considered. At any rate, unless the existing policy of the various Governments regarding granting leases liberally to established industries, liberalise transport and export policies, it will be hard and difficult to compete with other advanced nations in the world. Investments have been steadily increasing in the granite industry both for quarrying and processing factories. The supportive roles played recently by various State Governments, in relation to Minor Mineral Concessional Rules is a matter of encouragement to the industry. Hopefully, there will be more policy reforms, procedural modifications, operational modernization and other financial support such as reduced interest rates through banking system, which would enable the industry to perform better and encourage more business houses and entrepreneurs. References:
1. Indian Granite Sector Progressing Towards Supreme Heights

(http://www.worldstonex.com/en/InfoItem.aspArticleID=287)
2. Global trend of Natural Stone & Products

Indian Stone AIGSA Magazine, 2008 (http://www.worldstonex.com/en/InfoItem.asp ArticleID=47)

3. India Granite: Provincial Shift

01 February 2010 (http://www.stonebusiness.us/index.php?option=com_content&view=article&id=1436:indiagranite-production-sees-provincial-shift-212010)

4.

Indexing India's Stones Centre for Development of Stones (CDOS), 2009

(http://www.stonebusiness.us/index.php?option=com_content&view=article&id=741:indexingindias-stones&catid)
5. Granite industry seeks fiscal relief to survive recession

Business line, Mar 23, 2009

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(http://www.thehindubusinessline.com/2009/03/23/stories)
6. Indian industry, India in the world market 2008

(http://www.worldstonefairs.com/fairoverview.php?fairid)
7. Steep fall in granite exports over 2 years

Business line, July 16, 2009 (http://www.thehindubusinessline.com/2009/07/16/stories/2)

8. Granite mining

An article by NIIR project consultancy services, 2009 (http://www.niir.org/projects/projects/mining-quarrying-mineral-ore-granite-mining )