Ahmedabad / New Delhi: India’s soaring inflation is starting to hit home in a serious way.
The price of salt—edible and industrial—has increased anywhere from 10% to more than 100% over the past few months, thanks to an extended winter and heavy rains that has caused shortages in Gujarat, India’s salt capital.
The price of raw salt used by industries has risen to Rs700-750 per tonne in June from Rs250-300 per tonne till March, according to traders.
In the case of branded packaged cooking salt, the increase is at least 10%, but the prices of these were already high between Rs8 and Rs9 a kg (they now cost between Rs9 and Rs10). The cost of production for the companies behind these brands is around Rs2.50 per kg, according to a person in the salt trade who does not wish to be identified. To be sure, the companies also incur costs on distribution and marketing.
Retail prices of unbranded cooking salt has soared by 50% to around Rs9 per kg from Rs6 per kg earlier this year.
“Production is down almost 20% this year, while demand from the retail and industrial markets has increased by 5%,” said Ashok Parakh, managing director of Gandhidham-based Ankur Chemfoods Products (Guj.) Ltd, which sells salt under the Ankur brandname. “Tuticorin (in Tamil Nadu), which meets most of south India’s salt needs, too has run into rough weather. This has pushed the prices upward.”
Meanwhile, if the rain continues in salt-producing regions, prices could go up by another 20% by the end of 2008, he predicted.
Not everyone is convinced prices have gone up so steeply.
“The price of our brand (Shakti Salt) has gone up by only Rs1-2 (per kg),” said K.K. Kumar, managing director of Shakti Bhog Foods, which sells packaged wheat, flour, salt and rice.
He attributes the increase to higher “transport rates and increase in the wages of labourers in the salt farms”.
“The cost of transporting by road has gone up by about 10% to Rs350-400 per tonne of salt,” notes Parakh of Ankur Chemfoods.
While transporting by rail is much cheaper, at Rs55-60 per tonne, salt is not a high-priority commodity for the Indian Railways, making it more difficult to get wagons for transporting salt, added Parakh. Foodgrains and fertilizers are the top priority commodities for the Indian Railways.
Still, “there has not been a substantial increase in the price of salt” at the retail level, says Ram Kumar, vice-president (staples) with supermarket chain Spencer’s Retail, a unit of RPG Enterprises. “Yes, availability was a problem in the last month because of a tight supply from Gujarat and southern India. But, the supply is easing now and the problem will be resolved soon.”
India typically produces 14-15 million tonnes (mt) of salt in the October-June season, of which 8-9mt is used for making soda ash, bricks, detergents and caustic soda, as well as in the chemicals, leather tanning, dyeing and water softening industries. In the latest October-June season, India’s production fell to 12-12.5mt.
Gujarat accounts for 70% of the country’s total production, with about 10mt a year. Tuticorin produces around 2mt of salt a year.
“Tuticorin faced a long rainy season and near cyclonic activity this year, and production could begin only in mid-May rather than in January,” Ankur Chemfoods’ Parakh said.
Tuticorin’s production has fallen to 800,000 tonne to 1mt this year. As a result, Gujarat, which meets around one-third of northern India’s salt requirement, is facing additional demand from the southern states.
As a salt producer, Gujarat ranks ahead of Tamil Nadu and Rajasthan because of the dry and arid conditions in the western parts of the state. Warm and sunny weather plays a crucial role in the faster production of salt.
“The Kutch region (in Gujarat) has been witnessing longer rains the past two-three seasons, which begins in early June and lasts until mid-November, leaving less time for making salt,” said Hiralal Parekh, director of Gandhidham-based Doongursee Salt Works Pvt. Ltd.
“The situation this year is no different. The salt making process can now only begin in November,” he added.
For now, not every retail chain has raised selling prices of salt.
“It is selling at the same price. There was no hike in the recent past, and there is no indication even,” says R.C. Agarwal, chairman of discount chain Vishal Retail Ltd.