Tuticorin, in Tamil Nadu, is one of India's key salt-producing areas. However, with rising costs, a shortage of power and a dwindling labour force threaten to shut this industry down for good. CNBC-TV18's Poornima Murali reports.
Tuticorin, in Tamil Nadu, is one of India's key salt-producing areas. Its Rs 250 crore salt industry was once the lifeblood of this region and still caters to 25 percent of India's salt demand. But Tuticorin, which produces over 20 lakh tonnes of salt a year, is now in danger of losing its place as India's second largest salt-producing region.
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Labour costs are shooting up, it have been risen over 36 percent over the last two years and power costs have more than trebled. This has dragged margins down from 20 percent in 2012, to 6 percent today. If that wasn't enough, producers are facing pressure from their customers, both MNCs and domestic companies to reduce prices.
GN Chakravarthy, Executive Director of KSPS Group said, “MRP for domestic market is 12-14 rupees and for ITC it is 16-18. We are catering around 3,000 tonnes for Unilever and 1,000 tonnes for ITC. Even after knowing our situation, they are asking for reduction of upto 100 rupees.”
Given these tough conditions, small-scale salt producers who make up nearly 40 percent of the region's salt industry and were involved in it for generations, are looking at other means of employment.
Dhanabalan, Secretary, Small Scale Salt Manufacturer's Association informed that salt producers are planning to quit this business this year-end and enter other business. All salt producers do not want their kids to enter this business. In another 5-10 years from now, salt industry will not exist.
Exports, which have been a vital revenue source for this industry, are also falling. During April 2011 and February 2013, export volumes have dropped a whopping 18 percent from year-ago levels. Add to that the State Govt's decision to reclaim large chunks of land once dedicated to salt production, and salt producers have been left with a bad taste in the mouth. However, the government says this decision, which has reduced the area under salt production by 1500 acres so far, is justified.
Govt of Tamil Nadu has announced one project called Ship Building Yard. More than what's being offered in terms of employment double or triple number of people will have jobs.
Tuticorin's salt pans are key to Tamil Nadu's position as one of the three states that produce surplus salt and if things don't turn around soon, experts say India may no longer be able to boast of being the world's third largest salt-producing country after China and USA.