INDIAN GRANITE INDUSTRY A VISION FOR THE NEW MILLENIUM PART II

BY

MR. BHADRAVATHI DEVARAJ

DIRECTOR STONE TECH INTERNATIONAL SYSTEMS & SERVICES BANGALORE C-DOS Global Stone Technology Forum December 2009 Thanks to India, today China is number one in export of finished granite products to the world market. 53% of its rough block requirement is supplied by India in 2008 and the trend continues. Although India has all the required processing capacity, trained manpower and resources to convert these rough blocks into finished products and export to the global markets including China We have not done this. To quantify, roughly 1.3 million tons of granite blocks are exported from India annually, with approx value of Rs.13000 million. This quantity when processed in China and exported generates a value of around Rs.26000 million for them. The case is similar in the Steel industry. China is number one with 50 million tons production of finished steel products per month, while India is a major supplier of iron-ore. If this iron-ore could have been converted into finished steel products in India, with all the facilities available, perhaps here also we could have taken their place & exported added value finished products to them. By default, we have missed a great opportunity to be number one in the granite industry. However I am optimistic that even today it is not too late to achieve our vision to become the global leader. In my article Indian Granite Industry A Vision For The New Millennium published in the Feb 2007 edition of Stone Edge Magazine, I had focused on the innovative technologies in quarrying and processing we should adopt to achieve leadership status. In this article, I am reiterating the significance of

bringing about these innovative changes including framing relevant policy without looking for precedents. Globalization concept The emphasis should be on achieving the real benefits of globalization for India, by subscribing to the guideline that raw materials should be utilized to the maximum extent using local resources and supply only value-added products for export instead of exporting raw materials, whether it is granite rough blocks, iron ore or cotton. Proactive measures by Government Today the government is acting when the pressure from the industrial sector is powerful, like the textile industry. They are now implementing a ban on cotton exports, and providing incentives, special interest rates, abolishing of certain taxes, for the survival of the textile industry. (Exhibit 1)

Domestic growth market Standard Chartered Bank Global CEO Peter Sands, recently made a statement that the economies in Asia needed to focus more on strengthening domestic consumption to make the development process sustainable rather than only thinking in terms of exporting the products to the US, this is a challenge to China and India and most Asian economies. This is applicable to our granite industry as well. This is the right time for the government to consider duty-free imports of innovative energy-saving machineries and give freedom to 100% Export Oriented Units to sell their products in the domestic market, without any restrictions. This bold step has to be taken by the government, considering the global economic meltdown, followed by unprecedented recessionary trends in the developed countries. It need not be over emphasized that granite industry has to develop the domestic market, which fortunately is not seriously affected by the recession. From the global GDP growth figures, it is seen that only India and China are having a GDP growth rate of 5.4% and 8.5% respectively, while all the developed countries are showing a negative growth rate. (Exhibit 2)

According to Mr. Sanjay Anand, MD of CEDAR, a global management consultancy firm, in a recent assessment on real estate per capita, Indias position was at the bottom with 2.3 sq.mt per capita, compared to 10.2 sq.mt/capita in Middle East, and 39 sq.mt per capita in the US. (Business India, Oct 2009) We have a long way to go. There is a huge growth opportunity for granite industry domestically. Government subsidy to adopt cost-saving new technologies Another relevant example is the steps taken by the government to provide a total of Rs.52000 million to four public sector fertilizer plants to help them convert existing expensive naphtha and fuel-oil based plants to gas based plants for production of urea. The cost of production of urea using liquid fuel is over Rs.20,000 per ton and sold in the market at a government fixed price of Rs.4830 per ton, with the government reimbursing the difference to the manufacturers.

This amounts to a subsidy of Rs.1110000 million in the current fiscal. By doing this government expects to save on the subsidy by 50%, as the production cost using gas, will reduce to around Rs.10000 per ton. Multiwire technology Power Savings The same principle can be applied to the granite industry. By changing the sawing technology in processing units from traditional gang saws to diamond Multiwire saws, for each sq.mt of production, the savings in energy will be around 8 kwh. At a cost of Rs.6/kwh, the saving is Rs.48/sq.mt. For a production of 16 million sq.mt per annum, the energy savings alone will amount to Rs.768 million. This amount can be given as financial incentives to change from Gangsaw technology to Multiwire technology. (Exhibit 3) Exhibit 3: Savings in power using Multiwire technology Production: Gangsaw: Wiresaw: Power saved: Power cost: Power saving: 16 million sq.mt 16 million sq.mt * 13 kwh/sq.mt = 208 million kwh 16 million sq.mt * 5 kwh/sq.mt = 80 million kwh 128 million kwh Rs.6 per kwh Rs.768 million

The units of power saved can be used for other high value products such as Automobiles, Biotechnology, Agro-based industries, IT and Engineering industries. This can generate more employment for skilled labor. The money saved of Rs.768 million can be used for technology upgrades in the granite industry.

Energy efficiency is much more necessary than production of energy to meet future demands. This was the observation made by Mr. Rick Wade, Senior Advisor, US Dept of Commerce. He made further observation that investments in energy efficiency were five times cheaper than investing in energy production. This aspect has to be considered by our government by giving incentives to the energy efficient Multiwire technology. This technology should also be made eligible for getting carbon credits.

Multiwire technology Steel savings Multiwire technology saves substantial quantity of steel, which is used in Gangsaw cutting process as steel grits and steel blades. For production of 16 million sq.mt per annum of granite slabs, the steel consumption saved will amount to 64000 tons, equivalent to Rs.3200 million. (Exhibit 4) Exhibit 4: Savings in steel using Multiwire technology Production: Steel blades & grits required: Gangsaw steel consumed: Wiresaw steel consumed: Quantity of Steel saved: Cost of steel blade/grits: Steel savings value: 16 million sq.mt 4 kg/sq.mt 64 million kg 0 kg 64000 tons Rs.50/kg Rs.3200 Million

The value of steel saved can be put to use for our infrastructure and construction activities. Since the waste generated granite powder in Multiwire is free from steel, it can be utilized for ceramic industry whereas iron-contaminated granite powder cannot be readily used.

Multiwire technology Material savings & High productivity The Multiwire technology has 10 times higher productivity and thereby the process turnaround time is reduced, which in turn results in reduced inventory holding costs. This technology is eco-friendly and generates less waste materials. This in turn increases the yield of saleable products by 8% or more. (Exhibit 5)

Exhibit 5: Savings in raw materials using Multiwire technology Production: 16 million sq.mt Yield on Gangsaw: 1 cu.mt ~ 32 sq.mt Yield on Multiwire: 1 cu.mt ~ 35 sq.mt Raw materials for Gangsaw: 0.50 million cu.mt Raw materials for Multiwire: 0.45 million cu.mt Material saved: 0.05 million cu.mt or 50,000 cu.mt Average material value: Rs.35000/cu.mt Total sq.mt saved: 1.75 million sq.mt Average sale value: Rs.1500/sq.mt Total material savings:Rs. 2625 million The savings in raw material will contribute as finished products to a value of Rs.2625 million. This savings can be ploughed back in technology modernization.

Sawn Slab Clusters A new concept The concept of sawn slab supply clusters located at quarry sites, is an innovative approach and in no other country this concept is implemented as on date. Here again, if we are looking for precedents we will be left behind and will continue with the scoop & sell a shortsighted business policy. When we have the resources and facilities in-house to produce value added products, we must seriously think how we can stop or reduce export of rough granite blocks and instead export sawn slabs. The clusters of sawing facilities are to be established at the quarry site using Multiwire technology. Minimum processing capacity of these clusters should be of the order of 2 million sq.mt per annum. Eight clusters around prominent quarry sites will generate 16 million sq.mt of sawn slabs. (Exhibit 6 & 7)

Multiwire technology Wealth from waste All the wastage of block squaring will be left at the quarry site, which can be used for producing value added cobblestones, pavers and chips for road building, by installing high volume splitting & crushing plants, which can handle huge quantity of waste materials. (Exhibit 7a)

Advantages of Sawn Slab Clusters 1. Transportation costs will be reduced to extent of 40% or more, since all the wastage will be disposed close to the quarry sites. 2. The buyers will now have a choice to select the various grades of sawn slabs, and load them in trucks or containers at site, for transportation to their own facilities. 3. By procuring sawn slabs, the buyers will have the advantage of using their own polishing and finishing facilities either local or abroad, to maintain their individual quality standards and brand image. 4. Specialized activities of sawing only will minimize the investment per sq.mt of product. 5. Flexible order quantities and Just-in-time deliveries will now be a reality with the sawn slab clusters. 6. For export, waiting time at the port for bulk shipment of blocks (e.g. 2-3 months) can be avoided, and sawn slabs can directly reach the destination within a reasonable time in containers. 7. From the eight clusters, different colors of materials can be sourced in required quantities. Multiwire technology A novel approach with far reaching effect It was Albert Einstein who said, If at first the idea is not absurd, then there is no hope for it. Many Gangsaw manufacturers believed and predicted that diamond Multiwire machines will not work, and will have many problems and is an absurd invention. Indian granite industry found comfort in believing this and hesitated to invest in Multiwire technology. Today almost all Gangsaw manufacturers have retraced their statements and started imitating and manufacturing Multiwire machines under their brand name. Now, there are more than 10 manufacturers of Multiwire machines around the world. This is good for the industry. Multiwire technology presence in India Although across the globe, there are more than 50 Multiwire machines working in the last 5 years, in India, there is only one Multiwire machine working in Malur near Bangalore. Stone Tech set up this unit with the sole purpose of propagating an innovative idea. It is bringing an awareness of the technological advantages for the betterment of the Indian granite industry. (Exhibit 8 & 9)

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Diamond wire technology is advancing very fast, and today the cost of production for the consumable is at par with Gangsaw operations when considering the 10% additional yield in finished products. While steel continues a steep climb, the cost of synthetic diamond is progressively coming down and eventually the cutting cost will become cheaper than Gangsaw consumables.

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Hydraulic Drilling - Adoption at quarries The other area of importance, which has not been paid much attention till recently, is the high power hydraulic drilling operations using multi-drills in quarries. The advantages of hydraulic drilling machines are: a. Savings in diesel cost to an extent of 50% b. Reduced dependence on hand drilling operators c. Avoiding health hazards to quarry workers by providing inbuilt dust collection systems in hydraulic drilling equipment d. Faster speed of operation with five times increase from 0.3 mts/min to 1.5 mts/min. e. Straight drilling operations result in well squared blocks f. Squared blocks provide increased yield, reduced royalty payments & reduction in transportation costs by around 20% As an example, in the Chimakurthy area of Ongole, Andhra Pradesh where Black Galaxy is quarried, many hydraulic drilling machines are in operation. The productivity from the quarries in this region using two-drifter powerful Girodrill 200 machines, has increased by 100%, and manpower reduced by 20 persons for every machine in work. More quarry owners in Karimnagar,

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Bellary, Ilkal, Vizag and Madurai are adopting the two-drifter Girodrill 200 machines. (Exhibit 10 & 11)

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Technology products development In the spirit of globalization, it is time to assess the optimum cost at which granite-processing machineries can be manufactured in India and exported to other countries. Today, the level of sophistication and technological manufacturing facilities available in India is of international standards, and these facilities are availed by multinational companies of USA & Europe for outsourcing their products & sub assemblies, including assembling finished products in Automobile engineering and Aerospace sectors. It is surprising that even after 40 years of association with Italian companies, both the countries have failed in their responsibilities in not having established collaborative joint ventures in manufacturing granite processing machineries and consumables in India, excluding diamond tools to some extent. This could have benefited both the countries. On the other hand, China has the manufacturing facilities to meet its local demands as well as export machineries to other countries as well. This is the time for both Italy and India to seriously establish joint ventures taking

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advantage of Indian resource available along with Italian machinery and consumable technologies to produce cost effective products for our industry. Human Resource Development It is high time that professional training be imparted at all levels of personnel in the granite industry, whether it is quarry or manufacturing units. The level of training and skills development provided in Engineering and Information Technology industries is worth following, and applying to our industry if we want to empower our workforce and make their caliber world-class. Unless we pay attention to manpower training, bringing in high technology machineries alone, will not give the desired effect. In the diploma and degree level technical courses, granite processing should be included in the curriculum. Research and Development The granite industry in general lacks in-house R&D facilities and attention must be paid to this area to maintain sustainable growth and provide challenging work environment. Stone Tech International is extending full cooperation for the research project jointly organized by C-DOS and ITALIAN TRADE COMMISSION coordinated by professors from Maharana Pratap University of Udaipur. They are evaluating the competitive advantages of Multiwire technology & Hydraulic drilling machineries. (Exhibit 12)

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Conclusion I would like to stress that Indian Granite Industry has a great future to be number one in the world. Provided we take a passionate approach to sell value added products at a competitive price for the domestic as well as export market. We have to make sincere efforts to be truly global in our approach and assimilate the latest technologies, as well as follow best management practices, keeping in mind that we have to face global competition.

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