 "Guar gum processors in dire straits")
Guar gum processors have shut around 60 per cent of installed capacity over the past three years, following the sharp decline in its demand on falling crude oil prices.
Guar gum is used in the fracking process for crude oil extration. When crude's price jumped to $147 a barrel in 2008, the United States revived its extraction in deepwells by using guar gum. India, the world's only producer, shipped a record 700,000 tonnes in 2011-12, of which 60 per cent went to the US. Processing factories mushroomed, taking the gum's installed capacity to around 1.5 million tonnes. With crude oil now at $40 a barrel, the demand evaporated and the industry is now left with around 0.7 mt of gum processing capacity.
"Foreign demand is unlikely to see an uptick till crude oil bounces back to $65 -70 a barrel. We can see at least a 50 per cent decline in guar gum export next year," said Uday Merchant, chairman, Lucid Colloids, a city-based gum producer and exporter.
Around 70 per cent of gum output finds application in the oil and gas sector. The rest goes for hardening and sustaining agents in the textile industry and elsewhere.
Falling demand has impacted the only BSE-listed company in the sector, Vikas WSP. It had a record turnover and net profit of Rs 977 crore and Rs 161 crore for the quarter ended June 2012, when guar seed and gum prices were Rs 33,000 a quintal and Rs 101,000 a qtl, respectively, in spot markets; it has since gone into the red. It share was trading at Rs 70 four years earlier; it is now Rs 6. Efforts to reach B D Agarwal, managing director, didn't get a response. Their net loss for the December 2015 quarter was Rs 95 crore.
Guar seed and gum prices are now Rs 3,200 a qtl and Rs 5,700 a qtl, respectively, resulting in many processing units turning unviable. "Around 60 per cent of gum production capacity has shut down. Producers are completing past orders. So, the overall scenario is likely to worsen further in the months to come," said Ravikant Kanoongo, director, Hindustan Technosol, a Jaipur-based gum exporter.
Various estimates suggest seed output at 1.6 mt for 2015-16, a decline of around 10 per cent from 1.8 mt the previous year; it was a record 2.7 mt in 2013-14.
Seed output this year is estimated to decline by 50 per cent, on farmers shifting to millets in the major producing states of Rajasthan, Gujarat, Haryana and Madhya Pradesh.
