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Guargum exports rebound from 6-year low on US, Norway demand

Guargum exports rebound from 6-year low on US, Norway demand

APRIL 12 2018

 

After hitting a six-year low, the exports of guargum in rupee value terms have rebounded in fiscal 2018 on renewed overseas demand from the US and Norway. Shipments of guargum, which is used in fracking, a method to extract shale gas, are likely to improve further on better price outlook for crude oil, industry players and analysts said.

 

Shipments up

 

Latest export figures from the Agricultural and Processed Food Products Export Development Authority (Apeda) reveal that guargum shipments for the April-February 2018 period grew 39 per cent in rupee terms to ₹3,713 crore over corresponding last year’s ₹2,666 crore. In dollar terms, the shipments were up 45 per cent at $577 million ($396 million). In volume terms, the shipments till February were up 7 per cent at 4.49 lakh tonnes (lt) over 2016-17’s 4.19 lt. “We see some pick-up in demand as crude prices are inching up and the rig counts are going up,” said Premal Joisher, Director, Premcem Gums Pvt Ltd, a guargum manufacturer and exporter.

 

Guar and crude oil

 

Guargum, extracted from guarseed, is used as an emulsifer in the hydraulic fracturing technique used in shale gas and oil exploration in the US, which accounts for about more than 60 per cent of India’s exports. Norway, China, Germany and Russia are the other major buyers.

 

“Supply restriction of crude from OPEC nations and Russia is likely to support crude oil prices in the coming months and may prove beneficial for oil drillers in the US. Exports are expected to improve further from April onwards as per export seasonality index based on last nine year guargum export from India,” Veeresh Hiremath, Research Head, Karvy Commodities Broking, said in a report.

 

Tracking the improved demand, guargum and guarseed futures have rallied by over a third since October. However, the prices have turned volatile since February. Guar is mainly grown in Rajasthan, which accounts 70 per cent of the output, followed by Haryana, Punjab, Gujarat, and Madhya Pradesh among other States.

 

Need govt support

 

After touching a high of close to $4 billion in exports during 2012-13, shipments of guar had progressively slowed down in the recent years. Dilip Soni, Director, Jodhpur-based Shree Ram Gum and Chemicals, said the guar industry is suffering in the face of poor demand as the oil drilling sector is going in for a technology shift and moving away from guar.

 

Morevoer, the guar industry is not getting any incentive or support from the government to help promote the product, Soni said. It used to enjoy the Vishesh Krishi and Gram Udyog Yojana but not any more.

 

“In the last foreign trade policy, our products were removed from the list of Merchandise Exports from India Scheme (MEIS) scheme, which has been a great set-back for the industry,” Soni said. “Our suggestion is to allow MEIS cover on finished products so that the industry is incentivised and flight of raw material is also halted.”

 

Higher GST slab

 

Additionally, guargum exporters have been kept in the 18 per cent GST category. “But, since almost 90 per cent of the product is being exported, the rationale disappears since they are made to apply and wait for refunds. This leads to blocking of working capital. The raw material is being taxed at five per cent and our suggestion is to keep us in the same slot,” Soni said.

 

A huge quantity of raw material in the form of guar splits is being exported to make high-value derivatives, whereas no industry exists in India. Soni said the local industry should get the benefit of technology from government institutions so that derivative products can be manufactured locally, to earn more foreign exchange.

 

Source:https://www.thehindubusinessline.com

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