Import protection helps soda ash industry

Import protection helps soda ash industry

Lower import and anti-dumping duty (ADD) on imported soda ash helped Indian producers to improve their net profit margins in 2015-16.

While domestic production rose, imports declined by 16 per cent. According to Alkali Manufacturers’ Association of India (AMAI) data, India had imported 705,600 tonnes in 2014-15, down to 591,990 tonnes in 2015-16.

‘’Indian manufacturers were able to satisfy the demand in the domestic market and China volumes were low, owing to availability issues there. As a result, import declined,’’ said Sunil Bhatnagar, president (marketing) at Gujarat Heavy Chemical Ltd (GHCL).

This reflected on producer companies’ balance sheet performance. GHCL’s profit after tax (PAT) was Rs 181.9 crore for the financial year ended March 2015 and rose to Rs 256.5 crore for the year ended March 2016. The net profit margin (NPM) increased to 10 per cent, from the earlier 7.7 per cent.

Similarly, the PAT of Tata Chemicals rose to Rs 780.2 crore in 2015-16 from Rs 596.5 crore in 2014-15; the NPM increased to 4.4 per cent from 3.5 per cent in this time. DCW, in a loss during 2014-15 at Rs 5.9 crore, registered net profit of Rs 18.6 crore in 2015-16.

‘’Because of ADD, import of soda ash has been limited and this has helped Indian companies. If government will remove it, import will definitely increase, due to the price factor. It might also force manufacturers to decrease their production,’’ said Mudit Jain, managing director of DCW and committee member of AMAI.

AMAI says the country requires 3.2 million tonnes a year, mainly consumed by the detergent and glass industries. Leading producers such as Tata Chemical, GHCL and Rohit Surfactants (RSPL) are raising their production capacity. Output rose to 2.69 million tonnes in FY16, from 2.5 mt earlier.

The industry has been attempting to remain competitive with international prices, other than in the southern and eastern parts of the country where imports are more viable on account of cheaper logistic costs. However, China with a capacity almost 10 times the Indian size and the US with their natural soda ash having a huge cost advantage, are a threat to the Indian industry.

In the first phase, GHCL, which at present has 850,000 tonnes production capacity, will raise it by 100,000 tonnes by FY’17, with an estimated investment of Rs 375 crore. In the next phase, likely to be completed by FY19, it plans to invest Rs 575 crore to increase capacity by another 150,000 tonnes.

‘’Prices have always been an issue for the industry in India because of various factors such as raw material costs, power rates and higher interest rates. Other countries are offering the same products with lower cost,’’ said Jain.