1

EXPORT PROSPECTS OF GRANITE

ranite as Stones

known of

King

because of its inherent characteristics

such as extra fine mirror surface polish, and scratch free glossy durability. Indian granite has become the most sought after and extensively used stone material in building constructions and massive structural works throughout the world and is well known in the international market not only for its elegance and aesthetic quality but also for its durability. India accounts for 30 per cent of the worlds export of high quality natural stones like granite, marble, sandstone. The country has emerged as one of the leading countries in the production and export of granite and other stones. The country has vast resources of granite with about 1120 varieties of different colours and textures. The industry is producing a wide range of granite based products, viz. granite tiles, slabs/blocks, monuments, tombstones, table tops and several handicraft items like costume jewelry boxes, ashtrays, pen stands, paper weights etc. Ever since the Government of India pronounced Granite as a Thrust Sector in 1990, the granite industry has taken a new turn. Today granite has emerged as a major foreign exchange earner. Indias export of granite and granite based products witnessed a phenomenal growth by reaching a level of Rs. 3,490.58 crore in 2005-06

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as against Rs. 2,562.26 crore in 2004-05 thereby registering a growth of 36.23 per cent. GLOBAL TRADE (i) World Imports:

Separate world trade data on granite and granite products is not available. However, its data in terms of value has been clubbed with other stones under the above stated head. As reported in various studies relating to granite, it is motioned that granite accounts for a lion share of stone-based products. A close glance at Table 1 reveals that in the year 2003, China emerged as the largest importing country of stones thereby placing Italy in the second rank which happened to be the largest importing country in 2002. In the year 2003, China registered a significant growth of 33.44 per cent over the previous year when its imports touched a figure of US$583 million as against US436.9 million. The other countries registering a steep growth during the period included: Belgium (34.26%), UK (23.56%), Spain (20.16%), Netherlands (16.86%), and France (15.34%). TABLE 1 WORLD IMPORTS OF STONE, SAND AND GRAVEL IN 2002 AND 2003 BY MAJOR COUNTRIES (SITC Code: 273) (US$million) Country China Italy Germany USA Netherlands Belgium France Spain 2002 436.9 534.5 375.1 360.9 308.5 215.1 193.0 185.0 2003 583.0 559.0 421.8 384.0 360.5 288.8 222.6 222.3 %growth 33.44 4.58 12.45 6.40 16.86 34.26 15.34 20.16

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Japan 195.0 211.2 8.31 UK 151.5 187.2 23.56 WORLD TOTAL 5,047.1 5,801.3 14.94 Source: Compiled from the data of UN, Yearbook of International Trade Statistics 2004, Volume II: Trade by Commodity, Geneva.

(ii) World Exports: World exports of stone-based products in 2003 registered a growth of 13.15 per cent over the previous year when the same rose to US$4,618.2 million as against US$4,081.5 million in 2002. Germany continues to be the largest exporting country. In 2003, the country showed a growth of 9.26 per cent over the previous year when its exports increased to US$373 million as against US$341.4 million. The countries showing a steep growth during the period included: Brazil (131.23%), Turkey (62.63%), Austria (25.95%) and Belgium (16.17%). Further, the data given in the table shows that India continue to retain its ranking as the third largest exporting country of stone-based products next to Spain and Germany. The country during the period witnessed a marginal growth of 4.63 per cent when its exports went up to US$334.8 million as against US$320 million. TABLE 2 WORLD EXPORTS OF STONE, SAND AND GRAVEL IN 2002 AND 2003 BY MAJOR COUNTRIES (SITC Code: 273) (US$million) Country Germany Spain India USA Belgium Italy France Norway China Austria Turkey Canada Brazil UK WORLD TOTAL 2002 341.4 321.3 320.0 313.0 250.5 272.7 227.5 193.3 158.0 115.2 88.3 130.3 50.6 105.0 4,081.5 2003 373.0 339.2 334.8 323.5 291.0 282.7 258.7 216.8 172.0 145.1 143.6 139.1 117.0 115.7 4,618.2 %growth 9.26 5.57 4.63 3.35 16.17 3.67 13.71 12.16 8.86 25.95 62.63 6.75 131.23 10.19 13.15

Source: Compiled from the data of UN, Yearbook of International Trade Statistics 2004, Volume II: Trade by Commodity, Geneva. INDIAN SCENARIO The granite industry in India is concentrated mainly in the states of Karnataka, Andhra Pradesh, Rajasthan. potential of Tamil Nadu Realising granite, and huge many

others states have set up granite units. These include: Orissa, and Bihar. The Capexil set up by the Government of India under the aegis of Ministry of Commerce and Industry (formerly known as the Chemicals and Allied Products Export Promotion Council) over the years has been plying an important role in promoting exports of granite and granite based products. Besides, the Capexil as reported in The Hindu Business Line July 27, 2006 has submitted a proposal to the Ministry of Commerce and Industry, Government of India for creating a Mineral Upgradation Fund worth Rs. 5,000 crore. The fund if approved by the Ministry will be used to provide subsidies to modernize technology used in the extraction of natural stones such as granite, marble and sandstone, etc. and upgrade stone products processing units. All India Granites and Stone Association (Bangalore) has also been playing an equally important role in promoting granite industry by organising international trade fairs on granite and other stones in India after every four years. These fairs have been widely participated by the leading exporters/importers and other concerned interests both from India and abroad. The interaction among the key players in such gatherings help the industry to generate export orders and also acquire the latest technical know-how about the developments in the granite industry in the world. Madhya Pradesh, Assam, Gujarat, Maharashtra

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The Government of Indias policy to accord status of 100% Export Oriented Units to granite industry has resulted in the formation of a large number of 100% EOUs for manufacturing granite-based products. Over the recent years, demand for Indian granite both in the domestic and foreign markets has been continuously going up. Though India exports granite of varying colours, yet black granite known popularly as Indian Black is in great demand. Government of India has realized the importance of granite as an item offering tremendous export potential. As a result, it has initiated several steps to promote exports of granite and granite based products. Some of the steps taken recently include: (i) Declaring granite as a thrust sector for promoting exports in a big way; (ii) Constitution of a separate Panel Granite, Stone Products Thereof by the Capexil (formerly known as Chemicals and Allied Products Export Promotion Council, an export promotion body set up by the Ministry of Commerce and Industries, Government of India to boost exports of chemicals and allied products; (iii) Inclusion of granite in the select list of items eligible for setting up units under 100% Export Oriented Units Scheme launched by the Govt. of India under the aegis of Ministry of Commerce and Industry; (iv) Inclusion of Granite in the ITPO (India Trade Promotion Organisation) range of products for export promotion; (v) Government policy for phasing out export of rough and crude granite thereby focusing on export of finished/polished granite in the form of slabs, tiles, handicraft items; (vi) A new uniform policy on granite related with leasing and systematic exploitation of granite resources without affecting environment; (vii) Formulation of new set of rules, titled Granite Conservation and Development Rules by the Ministry of Mines, Government of India in consultation with leading granite producing states such as Andhra Pradesh, Karnataka, Tamil Nadu and Rajasthan.; (vii) Setting up of a Granite Development Council under the aegis of the Ministry of Mines, the Government of India with due representation from various concerned government departments and other related organizations.; (viii)Setting up of a separate Export Promotion Council for EOUs and SEZs under the aegis of Ministry of Commerce & Industry, Government of India with the main objective of giving a boost to the export of 100% Export Oriented Units. PRODUCTION CONSTRAINTS One of the most disturbing trend witnessed in the export of Indian granite in recent years related with China emerging as the major importer of Indian rough granite. In

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1998-99, it imported the same to the tune of Rs. 38.2 crore which in the subsequent years continuously increased to Rs. 152.4 crore in 1999-2000, Rs. 189.2 crore in 2000-01, Rs. 195.8 crore in 2001-02, Rs. 251 crore in 2002-03, Rs. 513.4 crore in 2004-05 and Rs. 606.2 crore in 2005-06. It has now become Indias major competitor in the polished granite. As a result of this development, most of the granite processing units have become sick and plagued with gross under-utilisation of installed capacity as they are not getting required category of rough granite for processing. This is indeed not a healthy sign and need attention of all the concerned interests i.e. trade and industry, state governments and the policy makers. Another constraint which the granite industry today is facing relate to technological impediments. Only 20 per cent of the total 10,000 quarries both large and mediumsized in India resort to mechanized extraction of stones. Technological constraints have severely impacted demand supply chain. Modern methods such as wire-saw cutting and jet piercing are not popular among quarry owners who still use the blast method. There is strong felt need to modernize and standardize extraction procedures. The blasting method used by quarry owners result in huge scrap losses. This severely affects productivity. Granite industry is finding difficulty to meet big orders from Europe and America because of the non-availability of rough granite and marble blocks. The problem is further aggravated due to closure of several quarries in Karnataka, Maharashtra and Andhra Pradesh. Especially, the closure of quarries in Karnataka has resulted in severe shortage of premium granite varieties such as Red Multicolour. Indian Juprna, Black Galaxy, Absolute Black, Madurai Gold and Kashmir white. INDIAS EXPORTS (i) Indias ExportsSegment wise: Indias exports of granite and granite-based in 2005-06, as may be seen from Table 3, registered a significant growth of 36.23 per cent when the same reached a level of Rs. 3,490.58 crore as against Rs. 2,562.26 crore in the previous year. Further analysis reveals that Granite blocks/tiles polished emerged as the major segment thereby placing Granite crude or roughly trimmed in the second rank. This segment happened to be the largest segment of exports in 2004-05. The segment during the period registered a record growth of 56.10 per cent when its exports peaked to Rs. 1,497.56 crore as against Rs. 959.33 crore. The segments showing an equally impressive growth during the period included: Other items of polished granite (117.42%), Other granite (79.09%), and

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Granite merely cut into blocks/slabs of rectangular/square shape (33.21%). On the other, the segment Granite crude or roughly trimmed registered a marginal decline of 1.37 per cent. TABLE 3 SEGMENTWISE INDIA'S EXPORTS OF GRANITE AND GRANITE- BASED PRODUCTS IN 2004-05 AND 2005-06 (Rs. million) HS Code Sector 2004-05 2005-06 %growth

68.02.2310 Granite blocks/tiles polished 2516.1100 Granite crude or roughly trimmed

959.33 (37.44) 1,054.27 (41.15) 189.16 (7.38) 222.03 (8.67)

1,497.56 (42.90) 1,039.78 (29.79) 411.27 (11.78) 295.77 (8.47)

56.10 (-)1.37 117.42 33.21

68.02.2390 Other items of polished granite 2516.1200 Granite merely cut into blocks/slabs of rectangular/square shape

68.02.9300 Other granite TOTAL (ALL INDIA)

137.47 (5.37) 2,562.26 (100.00)

246.20 (7.05) 3,490.58 (100.00)

79.09 36.23

Note: Figures within brackets indicate percentage shares of the total. Source: Compiled from the data of DGCI&S, Monthly Statistics of Foreign Trade of India, Volume I-- Exports & Re-Exports, March 2005 and 2006 issues, Kolkata.

(ii) Indias ExportsCountry wise: USA continues to be the largest market for Indian granite and granite-based products. There was a phenomenal increase in exports to this market in the year 2005-06 over the previous year when the same reached a level of Rs. 3,490.58 crore as against Rs. 2,562.26 crore in the previous year. The other markets showing a steep growth during the period comprised: UAE

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(80.31%), Canada (66.48%), Germany (37.82%), UK (36.42%), Netherlands (28.11%), Australia (25.97%), Spain (18.36%), and China (18.05%). On the other, the countries witnessing a negative growth during the period include: Japan (14.68%), and Taiwan (1.56%). TABLE 4 INDIAS EXPORTS OF GRANITE AND GRANITE BASED PRODUCTS TO MAJOR COUNTRIES IN 2004-05 AND 2005-06 (Rs. crore) Country USA China Italy Germany UK Belgium Spain Hong Kong Taiwan Netherlands UAE Canada Australia Japan TOTAL (ALL INDIA) 2004-05 576.21 513.48 305.68 104.10 101.01 114.66 94.17 95.98 107.39 79.09 55.40 42.09 35.43 37.25 2,562.26 (100.00) 2005-06 1,049.43 606.16 328.52 143.47 137.80 125.30 111.46 108.68 105.72 101.32 99.89 70.07 44.63 31.78 3,490.58 (100.00) %growth 82.13 18.05 7.47 37.82 36.42 9.28 18.36 13.23 (-)1.56 28.11 80.31 66.48 25.97 (-)14.68 36.23

Source: Compiled from the data of DGCI&S, Monthly Statistics of Foreign Trade of India, Volume I-- Exports & Re-Exports, March 2005 and 2006 issues, Kolkata. Indias exports of major varieties of granite and granite based products in the years 2004-05 and 2005-06 and Indias exports of major granite and granite based products during the period in select markets appear at Annexures I and II. Export Strategy There is a need to evolve a suitable export strategy to tap tremendous export potential of granite. Some of the points to be made in the strategy should include (i) Modernising the industry by providing all govt. support viz. R&D activity and liberal policy for import of latest machinery for mining, cutting and processing of granites at the concessional rate of duty; (ii) Restricting export of rough granite to enable the

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processing units to source the same without any hurdles; (iii) Upgrading granite as a Major Mineral. At present, it is classified as a minor mineral coming under the states list; (iv) Putting granite in the list of principal export products. The data on principal export commodities from India is being compiled by the Directorate General of Commercial Intelligence & Statistics (DGCI&S) in the Annual Publication entitled Foreign Trade Statistic of India Principal Commodities & Countries. ANNEXURE I INDIAS EXPORTS OF MAJOR GRANITE AND GRANITE-BASED PRODUCTS TO IMPORTANT COUNTRIES IN 2004-05 AND 2005-06 (Rs. crore) HS Code 68.02.2310 Item/Country Granite blocks/tiles polished USA Germany UK UAE Netherland Belgium China Canada Italy Spain Australia Japan Taiwan France Turkey Saudi Arabia Ireland Hong Kong Qatar Kuwait Nigeria Russia South Africa Poland Singapore Korea Rep New Zealand Denmark Total (incl others) Granite crude or roughly trimmed 2004-05 382.16 73.43 46.40 43.87 54.11 41.22 36.58 26.08 11.79 14.68 24.07 25.51 12.65 22.11 6.84 8.82 10.15 1.80 8.45 4.10 8.78 5.34 3.73 4.59 5.58 4.36 4.31 3.58 959.33 2005-06 705.86 87.51 69.11 66.67 60.37 53.35 52.89 38.79 35.40 33.37 27.13 23.61 21.35 21.01 14.13 12.25 11.98 10.21 10.12 9.49 9.25 8.48 8.40 8.28 5.88 5.62 5.56 5.01 1,497.56 %growth 84.70 19.17 48.94 51.97 11.57 29.43 44.59 48.73 200.25 127.32 12.71 (-)7.45 68.77 (-)4.98 106.58 38.89 18.03 467.22 19.76 131.46 5.35 58.80 125.20 80.39 28.90 29.00 39.94 56.10

2516.1100

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China Italy Hong Kong Taiwan Spain USA Belgium Norway Item/Country Thailand Total (incl others) Other items of polished granite USA Germany Netherlands UAE UK France Canada Belgium Turkey Ireland Australia Italy Indonesia Saudi Arabia Israel Japan Kuwait China Bahrain Total (incl others) Granite merely cut into blocks/slabs of rectangular/square shape Italy China UK USA Taiwan Hong Kong Spain Germany Greece UAE Ireland Thailand Japan Netherlands South Africa 409.26 245.80 86.47 77.12 60.81 34.46 45.93 18.60 2004-05 8.63 1,054.27 476.50 174.54 87.82 81.74 65.54 43.30 41.76 14.77 2005-06 10.29 1,039.78 16.43 (-)28.99 1.56 5.99 7.78 25.65 (-)9.08 (-)20.59 %growth 19.24 (-)1.37

HS Code

68.02.2390

66.60 15.85 17.46 4.87 14.40 10.41 9.03 9.62 2.15 5.53 3.33 1.44 1.43 1.22 0.86 3.54 0.64 1.05 0.68 189.16

145.39 38.21 32.96 21.48 20.05 19.83 17.55 16.69 13.35 8.77 6.95 6.85 4.40 4.03 3.94 3.08 2.85 2.32 1.69 411.27

118.30 141.07 88.77 341.07 39.24 90.49 94.35 73.49 520.93 58.59 108.71 375.69 207.69 230.33 358.14 (-)12.99 345.31 120.95 148.53 117.42

2516.1200

45.76 66.59 21.20 9.21 16.81 7.45 16.17 3.46 0.14 3.81 1.24 1.27 1.15 1.31 0.97

108.39 74.45 21.24 14.15 11.13 10.59 6.49 5.91 3.78 3.11 2.71 2.59 2.00 1.94 1.30

136.87 11.80 0.19 53.64 (-)33.79 42.15 (-)59.86 70.81 2600.00 (-)18.37 18.55 103.94 73.91 48.09 34.02

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Total (incl others) HS Code 68.02.9300 Item/Country Other granite USA UK Australia Canada UAE Germany Belgium Spain Netherlands New Zealand Poland South Africa Italy Total (incl others) TOTAL (ALL INDIA) 222.03 2004-05 83.78 10.46 7.16 5.25 1.61 3.64 4.90 1.73 3.04 1.89 0.79 1.20 0.89 137.47 (5.37) 2,562.26 (100.00) 295.77 2005-06 140.73 22.67 9.93 9.46 7.24 6.48 5.70 4.53 4.15 3.99 3.58 3.55 3.34 246.20 (7.05) 3,490.58 (100.00) 33.21 %growth 67.98 116.73 38.69 80.19 349.69 78.02 16.33 161.85 36.51 111.11 353.16 195.83 275.28 79.09 36.23

Source: Compiled from the data of DGCI&S, Monthly Statistics of Foreign Trade of India, Volume I-- Exports & Re-Exports, March 2005 and 2006 issues, Kolkata. ANNEXURE II INDIAS EXPORTS OF GRANITE AND GRANITE-BASED PRODUCTS IN SELECT COUNTRIES IN 2004-05 AND 2005-06 (Rs. crore) HS Code 68.02.2310 68.02.2390 68.02.9300 25.16.1100 25.16.1200 Country/Item USA Granite blocks/tiles polished Other items of polished granite Other granite Granite crude or roughly trimmed Granite merely cut into blocks/slabs of rectangular/square shape Total (incl others) CHINA Granite crude or roughly trimmed Granite merely cut into blocks/slabs of rectangular/square shape Granite blocks/tiles polished Other items of polished granite 2004-05 382.16 66.60 83.78 34.46 9.21 576.21 409.26 66.59 36.58 1.05 2005-06 705.86 145.39 140.73 43.30 14.15 1,049.43 476.50 74.45 52.89 2.32 %growth 84.70 118.30 67.98 25.65 53.64 82.13 16.43 11.80 44.59 120.95

25.16.1100 25.16.1200 68.02.2310 68.02.2390

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Total (incl others) ITALY Granite crude or roughly trimmed Granite merely cut into blocks/slabs of rectangular/square shape Granite blocks/tiles polished Other items of polished granite Other granite Total (incl others) GERMANY Granite blocks/tiles polished Other items of polished granite Other granite Granite merely cut into blocks/slabs of rectangular/square shape Granite crude or roughly trimmed Total (incl others) UK Granite blocks/tiles polished Other granite 513.48 245.80 45.76 11.79 1.44 0.89 305.68 73.43 15.85 3.64 3.46 7.72 104.10 46.40 10.46 606.16 174.54 108.39 35.40 6.85 3.34 328.52 87.51 38.21 6.48 5.91 5.36 143.47 69.11 22.67 18.05 (-)28.99 136.87 200.25 375.79 275.28 7.47 19.17 141.07 78.02 70.81 (-)30.57 37.82 48.94 116.73

25.16.1100 25.16.1200 68.02.2310 68.02.2390 68.02.9300 68.02.2310 68.02.2390 68.02.9300 26.10.1200 26.16.1100 68.02.2310 68.02.9300

HS Code Country/Item 26.16.1200 Granite merely cut into blocks/slabs of rectangular/square shape 68.02.2390 Other items of polished granite 26.16.1100 Granite crude or roughly trimmed Total (incl others) BELGIUM 68.02.2310 Granite blocks/tiles polished 25.16.1100 Granite crude or roughly trimmed 68.02.2390 Other items of polished granite 25.16.1200 Granite merely cut into blocks/slabs of rectangular/square shape 68.02.9300 Other granite Total (incl others) SPAIN 25.16.1100 Granite crude or roughly trimmed 68.02.2310 Granite blocks/tiles polished 25.16.1200 Granite merely cut into blocks/slabs of rectangular/square shape 68.02.9300 Other granite 68.02.2390 Other items of polished granite Total (incl others)

2004-05 21.20 14.40 8.55 101.01 41.22 45.93 9.62 12.99 4.90 114.66 60.81 14.68 16.17 1.73 0.78 94.17

2005-06 21.24 20.05 4.73 137.80 53.35 41.76 16.69 7.80 5.70 125.30 65.54 33.37 6.49 4.53 1.53 111.46

%growth 0.19 39.24 (-)44.68 36.42 29.43 (-)9.08 73.49 (-)39.95 16.33 9.28 7.78 123.32 (-)59.86 161.85 96.15 18.36

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Source: Compiled from the data of DGCI&S, Monthly Statistics of Indias Foreign Trade: Exports & Re-Exports, March 2005 and 2006, Kolkata.

G.P. Gandhi *Formerly with the IIFT, New Delhi Quarter No. 1129, Sector - 12, R.K. Puram, New Delhi - 110022