Hard to sell Maddhapara hardwoods | Business standard

Private business is leaving it behind with cheaper imported stone

October 30, 2024, 07:15

Last modified: October 30, 2024 5:38 pm

Piles of quarried stones are stored near the Madhyapara stone mine in Parbatipur, Dinajpur. The government mine has around 10 lakh tonnes of unsold granite worth Tk 300 crore because buyers prefer cheaper Indian stones which are easily available, October 28, 2024. Photo: Khorshed Alam/TBS

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The country’s only stone quarry at Maddhapara in Dinajpur has all the logistics – its own operator. Capable of extracting 5,500 tonnes of construction grade granite daily from a 1.2 square kilometer mine, it has its own distributors, a guaranteed market and even a 13 km long railway line connecting the mining area to the national railway network.

But the state mine cannot sell its stone because it cannot compete on price with imported stones. While the country’s Tk 6,000-crore domestic granite market is growing at 25-30% annually amid a construction boom, Maddhapara hard rock reserves continue to rise and sales continue to plummet.

Although the quarry is capable of meeting 6% of the country’s stone demand, it was unable to sell a third of its output in the last financial year.

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The Maddhapara mine sits on unsold granite reserves of about 10 lakh tonnes worth Tk 300 crore as private buyers prefer cheaper Indian stones readily available in the market.

Several company officials said unsold inventory forced them to borrow money to pay a mining contractor and cover wages and benefits. Last month, Tk 30 crore was borrowed to pay off dues to the contracting company.

Reasons for failure

Complex marketing system, higher transportation costs and loss of large public sector clients to private stone suppliers have been cited as reasons for the decline in sales of Maddhapara stone.

Although government construction projects have slowed down amid the recent political turmoil in the country, low sales in Maddhapara have persisted for the past two years.

Mine officials say that if sales stagnation continues, mining operations will have to stop, which could put about 800 workers out of work.

Infographics: TVS

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Infographics: TVS

Why is Maddhapara stone more expensive?

Quarry officials and stone traders find Maddhapara’s complex marketing policies frustrating for individual buyers, who have to book stones in advance, pay cash at banks and arrange transportation of stones from the mine themselves.

The 2006 Marketing Guidelines, revised in 2017, favor designated distributors and government agencies over others. Since the railway tracks built solely to transport stones from the mine remained unused, the cartel of truckers made it expensive to transport Maddhapara stone to any part of the country.

Traders say 5-20 mm size stones imported from India cost TKR 120-130 per cubic foot, while the same size stone from Maddhapara costs TKR 140 per cubic foot.

Stones quarried from Maddhapara were commonly used in large government physical infrastructure projects of railways, highways, ports, electricity and public works, where these agencies had the power to procure stones and other materials themselves. But the situation changed when government agencies began to engage private contractors, who were free to purchase stones from the market and import them.

Thus, Maddhapara gradually lost its market in the public sector and a few still remained, such as Bangladesh Railway, Bangladesh Water Development Board and River Management. Following the regime change, work on all these infrastructure projects slowed down, significantly impacting the demand for local stone.

It is impossible to buy a stone without a dealer

Maddhapara stones are not sold directly to customers but through 150 appointed dealers, but their sales figures are not encouraging.

Abu Siddique, a stone trader and owner of Saba Traders, says: “Stones sold locally cannot compete because the price of imported stone from India is currently low.”

Energy and Mineral Resources Department Secretary Mohammad Saiful Islam told TBS on October 28 over phone that the major consumers of stone produced from the Maddhapara mine are the Railways and the Water Resources Development Board.

“Currently, the railways are not purchasing stone and private sector customers are unavailable due to transportation problems,” he said.

He added that to solve this problem, it was decided to repair the 65-kilometer railway line to transport stone from the mining area. The IPU Councilor takes both issues seriously. In addition, a letter has been sent to the Ministry of Railways requesting the use of stone from the Maddhapara mine.

Secretary Saiful Islam further noted that the Water Resources Development Board is currently using stones from the mine.

Maddhapara Granite Mining Company Limited, which is managed by Petrobangla, is responsible for selling the mined stone.

Its managing director Fazlur Rahman said: “Our stones are mainly used for Railway and Water Development Board projects, but in recent times local stone has not been used in these areas. We are actively raising awareness about this issue because using stone from this mine will revitalize the country’s economy. only a stone mine.”

The deposit was discovered in 1973-74.

The Bangladesh Geological Survey discovered the 1.2 square kilometer Maddhapara stone mine in 1973-74 and commercial production began in 2007 after development work. Since then, the country’s only stone mine has faced numerous problems.

Petrobangla initially extracted only 700 to 800 tonnes of stone per shift, far below the target of 5,000 tonnes over three shifts per day. As a result, by 2013, the company suffered losses running into hundreds of crores of taka.

In 2014, the Germania Trust Consortium (GTC) was entrusted with the production, maintenance and management of the Maddhapara stone mine for six years, successfully increasing stone production. The mine has been profitable since FY 2018-19.

The first phase of the GTC contract expired on September 2, 2021. A second six-year contract was then signed on September 3, 2021, with the agreement now quarrying 5,500 tonnes of stone daily across three shifts.

Truckers seized transport

Officials also cite transportation problems in getting stone from the mine to various parts of the country.

Contractors and traders say the topography contributes to higher transportation costs from the mine. To solve this problem, mining authorities have consistently advocated the creation of a railway line to improve connectivity.

However, it is alleged that these plans were thwarted by vested interests, namely the trucking industry.

Several officials associated with the mine said that a 13-km double-gauge railway line once connected the mine to Bhabanipur station in Parbatipur upazila of Dinajpur. The line was built in the early days of quarrying. However, road transport began to dominate the transportation of stone instead of rail.

As a result, the railway was stopped after six months of operation. To make the situation even worse, 8.8 km of railway track was stolen in early 2023.

Currently, transporting stone from Maddhapara to Dhaka and surrounding areas by road costs Tk 1,200 to Tk 1,300 per tonne. Freight cost to Chattgram ranges from TKR 2100 to TKR 2200 per tonne.

Dr. Obaidulla, Managing Engineer, Maddhapara Granite Mining Company, emphasized that the closure of the railway had a significant impact on the stone mining business.

He explained that by repairing the railway and resuming transportation by rail cars, the cost of transporting stone to Dhaka can be reduced to 400-500 tenge per ton. Similarly, the cost of transporting stone to Chattgram can be reduced to Tk 900-1000.

Demand for stone is growing, but sales of Maddhapara are falling

According to the mining company’s estimates in 2007, the country’s demand for stone then ranged from 45 to 65 lakh tonnes per year – 15 lakh tonnes coming from the Greater Sylhet and Greater Dinajpur regions. The rest was imported from India and Bhutan. Maddhapara Mining Company hoped to supply 16.5 lakh tonnes annually.

Mine officials estimate that the annual demand for stone in the country has risen to around 2.16 crore tonnes. In FY23, the Maddhapara mine produced around 10.63 lakh tonnes of stones but sold only 5.72 lakh tonnes.

In FY24, production increased to around 13.16 lakh tonnes with sales of 9.07 lakh tonnes.

The mine management reports that the company produces stones of different sizes, including stones measuring 0-5 mm (stone dust) at a price of TKR 1,150 per tonne, stone measuring from 5 to 20 mm at TKR 3,250 per ton, stone size 20 –40 mm priced at THK 3,600. per ton, stone 40-60 mm at 3650 Turkish crowns per ton and stone 60-80 mm at 2600 Turkish crowns per ton. In addition, boulder stone is sold at 3,200 tenge per tonne and fine dust at 740 tenge per tonne.