“The Entry Of Artificial Stones Is A Major Threat To The Granite Industry” - R. Sekar President, Federation of  Indian Granite and Stone Industry (FIGSI)

R. Sekar President, Federation Of Indian Granite And Stone Industry (FIGSI)

TDB: Could you please give us a brief overview of the granite sector in India?

R. Sekar (RS): India has huge granite deposits accounting to 4 trillion cubic meter and so far only 3% of the granite has been explored. We also have the potential to quarry these granite deposits and export. More than 100 granite varieties have been extracted and exported after value addition. The turnover of the entire sector is around Rs.25,000 crore, including exports and domestic sales. This industry provides employment to more than 1.5 million people. At present, India’s contribution is around 15% of the global production.

TDB: It is seen that value of India’s granite exports (cut or rough) has increased over the years but not at par with volumes. Is it because the price of granite in the global market has dropped? Can you describe the reasons for the fall in export prices?

RS: This is because of price cuts due to competition among exporters. It is not a healthy trend. The industry has to arrive at a uniform way of pricing, realistic in nature so that undue benefit is not given to the buyers.

TDB: Is it true that we have lost our traditional markets to lesser known exporting countries?

RS: It is true, some of the traditional markets have been lost to other countries. However, many new markets have also been explored. The market demand keeps changing based on the requirements. For instance, earlier huge volumes of granite were exported to Japan and Italy. The Japanese market has been taken over by China. Exports of granite blocks to Italy for value addition have dropped since we started processing stones here. Gradually, the industry adopted the latest technology and started exports of value-added products. Now, our finished products are well accepted all over the world and are being used in major projects. At present, value-added exports have exceeded 80% of total exports. The balance 20% is being exported as dimensional blocks since they cannot be processed in India.

TDB: While there is a very slow but positive growth in granite exports, why are we not able to reach our full potential?

RS: At present, the entire world is facing an economic slowdown and construction activities have drastically come down. Moreover, with the lack of policy support by both state and central governments, the availability of raw material (dimensional blocks) has also become an issue. Due to this, a majority of processing units are working 50% below their capacity and many are facing closure threats.

TDB: How can India expand its granite export potential? What can the government do to boost exports?

RS: India has the potential to increase exports by leaps and bounds. This can happen only if the raw material is made available to the industry in sufficient quantity and on continuous basis. This will be possible if more quarry leases are issued and imports of rough dimensional blocks granite blocks are allowed freely for value addition. This will help the industry to run its units to the full capacity, thus boosting exports. Further, the Government of India has to declare granite quarrying as an industry. In addition, export incentives like duty drawback need to be extended to the granite sector at par with leather, textile, and other industries.

TDB: STONA 2016 would be India’s 12th international stone industry exhibition. To what extent do these exhibitions help exporters?

RS: STONA is the fourth-largest stone fair in the world. When the first STONA was held in 1987, the granite exports from India stood at Rs.50 crore which crossed Rs.12,000 crore after STONA 2014. We are confident that the STONA 2016, which is the largest expo of Indian natural stone, will improve the prospects of the Indian stone industry and help the industry compete against its global counterparts.

TDB: What are the major threats and challenges for the granite industry?

RS: One of the major threats to the natural stone industry is the entry of artificial stones, which have captured the market in a big way. Artificial stones have acquired more than 30% share in US market, 40% in Australia and about 60% in Canada. This is because the granite industry is not in a position to ensure continuous supply to major markets, which is not the case with artificial stone industry. Further, one of our main competitors Brazil has devalued its currency by 45% following which they are offering huge discounts on finished goods to USA and other countries. They have not reduced the price of the blocks though. So the Indian export-oriented units (EOUs) – which have been importing blocks from Brazil and re-exporting after value addition – are finding it difficult to find buyers of their product in US. Also, since China has a free import policy, it imports huge quantity of dimensional blocks from all over the world and re-exports them after value addition. They have the advantage of government support. Besides, many quarry lease applications in our country are pending for over decades. Even working quarries have stopped because of non-issuance of Environment Clearance certificate.

TDB: Incentives – do Indian granite exporters require them urgently?

RS: There is no incentive on granite exports at present. Earlier, for exports, income tax exemption was given under 80 HHC which has been discontinued. Further, royalty and other taxes are very high and have to be rationalised if government wants us to compete with other countries. Export packing credit interest has to be reduced. Incentives should be given for new market exploration.

TDB: What do you expect from the state and central governments?

RS: All state governments need to follow long-term, uniform liberal policies for issuing quarry leases. Quarrying has to be given industry status so that those in the trade can avail the facilities provided under this status. Granite cannot be treated as a mineral in line with iron ore, manganese, coal, bauxite, etc. All other major minerals are graded at par with ore, while granite is tagged under decorative ornamental stones. This is not a graded product and individual variety of granite has to be promoted individually. Also, forest conservation and environmental norms need to be suitably amended. Moreover, the government needs to amend the EXIM policy and allow import of granite blocks to the country, which will enable the industry to have alternate/additional supply of raw material for processing industry to work in full capacity. Natural stone industry is the second largest sector to generate employment for the rural population. It has to be encouraged by both state and central governments.

“The Industry Does Not Get The Attention It Deserves” - Puneet Soni Director – Exports, Granite Zone India

TDB: Tell us about your range of products. What makes them exclusive compared to others in the market?

Puneet Soni (PS): We are into exports of granite slabs and cater to the market where granite is used for kitchen countertops, for monumental or decorative purposes and for exterior applications. We don’t export raw granite. We are exporters of value-added, processed granite. Our company’s strength is its research and development (R&D) and thus our products have some exclusivity. Apart from that we are more than 35 years old and in the last three decades our learning curve in the industry has been good enough. With years of experience, we have the right ingredients to process raw granite the right way. We do value addition at multiple steps and that makes our products unique.

TDB: What residential & commercial projects have you recently carried out?

PS: We are doing two major projects. In fact, we finished a big hospital project in Qatar a few months back. Currently we are working on the whole building of the US embassy in Islamabad in collaboration with the American government. We are also working on the construction of the Nigerian Senate.

TDB: To which countries are you exporting your granite? In the wake of global economic slowdown, are there any new markets that the Indian granite industry is trying to explore?

PS: We are currently exporting to United States of America and Canada in the North American market, Poland, Germany, Austria and Italy in Europe and few other countries including Ghana, Nigeria, Lebanon, Dubai and Mozambique in Middle East and Africa. I agree, there is an economic slowdown, but it is at a macro level and there is still a huge demand for granite which we (Indian players) are unable to cater to. Nevertheless, we are trying to gain a foothold in Latin America, Argentina, Bolivia and the Dominican Republic.

TDB: What is the image of Indian granite in the minds of foreign consumers?

PS: Indian granite is considered to be very exotic and luxurious. Granite in any market, as such, is considered to be a top-notch material used in the construction industry or in home interiors.

TDB: How has your company been performing on the export front?

PS: From quarrying to R&D to processing, everything is carried out by the company before exporting to our customers. We are a fully integrated company. That’s our core strength. We have witnessed a significant growth this year as compared to last year. The overall industry is growing at about 10-15% every year. For our company, the growth was almost 90% last fiscal. Our volumes have doubled and we are targeting newer benchmarks.

TDB: What according to you are the major threats to the industry?

PS: Besides the global economic slowdown that has affected the trade, the industry is facing internal hurdles such as inadequate raw material supply, lack of policy support etc. The granite industry is facing scarcity of raw material and has to import when there is a bulk order. This apart, increased exports from China and Brazil are also taking a toll on the granite industry at home. Cheap Chinese granite has disturbed our markets while Brazil is now exporting processed stones to US market increasing the competition for Indian players.

TDB: Are you happy with the current incentives provided by the government to exporters? If not, what do you think needs to be altered?

PS: We expect a lot more synergy from the government. What I feel is that the granite industry is being neglected in a big way. There are other major industries like leather and marble which are given more weightage than the granite sector despite it being a huge forex earner. Granite industry has not been given the attention it deserves. If the government supports us there is a huge scope to garner more revenues. Granite exporters feel very demotivated since there are hardly any incentive given to them and thus it gets difficult to compete with countries like China and Brazil. Also, duty drawbacks are not enough and they need to be high in order to encourage exports. The entire value chain needs to be given due support.

Exports From Brazil And China Are Taking A Toll On The Industry

“The Government Needs To Encourage Mining” - Gautam Chand Jain Chairman and Managing Director, Pokarna Ltd.

TDB: Tell us a bit about the granite business. How many granite varieties are you exporting and to how many countries?

GCJ: We started our granite company in 1991. We began with quarrying operations with black galaxy variety of granite. In 1995, we decided that instead of exporting rough blocks, we will ship finished products. But instead of putting a new factory, we took over some sick factories and revived them. In one year we took over three sick factories and then gradually we kept on adding new machines and expanding the business. In this industry normally companies are only into quarrying or processing or marketing but we decided to have an integrated approach to all three – quarrying, processing and marketing ourselves. Currently, we are quarrying 15 colours of granite from our 15 quarries. And we are exporting to 75 countries, but our main focus is US, Canada and Europe. Apart from quarrying, we also source blocks from other quarries as per the customers demand. We also import blocks from other countries in Europe, process it and re-export it to Europe and America.

TDB: Pokarna has been the largest exporter of finished granite from India. What is the USP of Pokarna’s granite?

GCJ: Firstly, what makes us different is our focus on quality. Quality comes first – that’s our philosophy. We don’t compromise on quality. It starts with having the right quality of raw material, right machines and right consumables and it goes up to proper packaging. We make sure that till the time our customer receives the material in his warehouse it must be perfectly packed. We feel proud to say that we deliver to our customers’ satisfaction – in terms of processing, service and as well as price. This is what makes us unique and stand tall in the market.

TDB: How has the company been performing in terms of exports?

GCJ: Very good actually! We are an export-oriented company. We grow consistently, at about 20%-25%. We never take big jumps as we are a conservative company. We do business with our own philosophy. We select our customers, look at the market situation, long-term supply and then proceed. In this way, we have built our credibility in the global market.

TDB: Why is it that India is exporting more of raw granite blocks/slabs and not processed product which has a bigger market and fetches better price? Is it because we don’t have the capability to process the product?

GCJ: No, it is not the case. It is the mindset. Processed material is mostly sold on credit where as raw blocks are sold on cash payment. So if anyone is getting an advanced payment, why would somebody sell in credit when they have so much raw material in their quarries? Secondly, there is a risk factor involved in processing. Once you process a granite, this risk factor comes into play since nobody knows what is inside the granite block. While processing if the block turns out to have fissures or is of poor quality, then you don’t recover the money of the blocks and you lose the money invested in its processing too. People don’t want to take this risk and as such prefer exporting raw blocks.

TDB: What are the major threats and challenges for the industry?

GCJ: When we talk about quarrying operations, the threat is from the small quarry owners who give competition by selling their product at lower rates. We, the big players, can’t do that owing to the huge investments involved. On a global level, the threat is from the host of countries which have of late captured our traditional markets. For instance, Brazilian granite is currently being sold in the American market at a very low price because of the currency fluctuation. Further, the threat from Chinese players is always there. They process low-quality granite and sell cheap stones in America which is a threat because when a customer looks at a low-end product, they go for price and we can’t compete at that low price as we have high processing cost.

TDB: Of late, the granite industry has been hit by a series of scams. Did it have any effect on the image of the sector globally?

GCJ: See the effect is there and it can be seen more in Tamil Nadu. Due to illegal practices, a lot of quarrying operations have been stopped. This has decreased the availability of raw materials. In Tamil Nadu, quarrying is more difficult since the mining laws there are very stringent. Fortunately, we operate in Andhra and Telangana regions where the laws are better. But we don’t have the beautiful colours as mines in Tamil Nadu. As there is limited supply of raw material, the demand for those coloured-granites has gone down. It is unfortunate that these developments have led the industry to suffer.

TDB: According to recent data, the world export volumes of granite have come down significantly over the years, reflecting a decline in demand. However, India’s exports have been on the rise. Is it that granite industry growth will soon be reaching a stagnation?

GCJ: The market is actually not very good worldwide. The European market is not doing well. The Gulf market too is not in a good shape. The overall sentiment in the construction industry is also not encouraging. And back home, the domestic market is also not performing. Notwithstanding the external hurdles, we are in a better position fortunately since we are focused on only granite and American market.

TDB: What kind of margins are there in the granite business?

GCJ: We are a listed company, so you can see our margins from time to time. As such there is no consistency in the margins. When we talk about quarrying, sometimes instead of making profits we lose money when we get bad material. It’s not a consistently profitable business. Profit margins keep fluctuating.

TDB: Are you happy with the incentives provided by the government to exporters? If not, what do you expect from the government?

GCJ: I don’t think government gives any incentive to the granite industry. Without any support, we do our work. It is very difficult to get a mining lease. So starting mining operations for exploring new colours is difficult. In my opinion, what is more important than incentive is encouraging the industry by giving mining leases for exploring new colours in granite and helping quarry owners identify different colours in the forest areas and trying to put it for mining.