India’s largest gelatin producer Nitta Gelatin India Ltd (NGIL) is being denied the manufacturing license for the past several years by the local panchayat citing pollution issues and each time the application is rejected, the company moves the Kerala High Court to maintain the status quo. It continues to suffer losses on production every year due to the agitation of a group of people who damage the pipelines discharging treated effluent water into the Chalakudy river. Gelatin has multiple applications in pharma, food and agriculture and the industry is showing a healthy growth worldwide.
Despite the anxieties created by a local group and Panchayat refusal to give manufacturing license, NGIL continues to make profits and looking at new product opportunities through consistent R&D enabled innovation.
NGIL was established as a joint venture between Kerala State Industrial Development Corporation and Nitta Gelatin Inc, Japan in 1975 as Kerala Chemicals and Proteins Ltd (KCPL) to produce ossein (intermediate product in the manufacture of gelatin) from animal bones. Following consolidation of the Japanese stakes in the company, it was renamed Nitta Gelatin India Ltd in 2008.
Mr Sajiv K Menon, Managing Director, NGIL has 32 years of experience in chemical and engineering industries. He became MD of NGIL in 2014 for a 3- year tenure and satisfied with his performance the management has extended his term for three more years. Mr Menon shares his views on the issues facing the company and growth prospects for gelatin industry worldwide with Sreekumar Raghavan of Corporate Ethos.
#NGIL (BSE: 506532) is always in the news for the wrong reasons. What is your view on the environmental issue facing your Thrissur plant?
We meet all the pollution control norms set by the regulators and there is actually no environmental issue in our Thrissur plant. A group of people opposed to the company are agitating against our factory for the past several years. The local panchayat in our view is taking a biased view of our operations. We are denied the statutory manufacturing license by them when we apply for renewal annually. Every year we move the Kerala High Court who allow us to continue. A 900- metre pipeline takes the treated effluents from our factory to the Chalakudy river. About 5 metres of the pipe goes through a private property and some people either damage it or block it there.
This financial year we lost 15 days (October 23- 15 November) due to damage caused to the pipe. It was on the intervention of the government that we could restore the damage and start operations again. (It may be recalled that in 2013-14 the plant was shut down most of the time and the same year the company reported a loss of Rs 5.57 cr).
We are a law abiding corporate citizen- extensive studies done by State and Central Pollution Control Boards, National Environmental Engineering Research Institute (NEERI) have established that we are fully compliant with pollution norms. National Green Tribunal has ruled in our favour and stated that we don’t pollute the river in any way. We cannot do anything if a group of people take law into their hands- it has to be handled by the administrative machinery. We don’t know what the motive of agitators is.
#Apart from disruption in production, has the local agitation impacted launch of new products or projects?
Despite the local issues, new investments are taking place but the top management do have their anxieties because this agitation has been going on for a long time. We will continue to adhere by environmental regulations and not break any law.
#You have two subsidiary companies, one located in Maharashtra and other in Gujarat. Does this help in mitigating the production issues you face in Kerala?
We have two subsidiary companies – Bamni Proteins Ltd located in Chandrapur, Maharashtra which was acquired 20 years ago and Reva Proteins Ltd in Jhagadia, Gujarat. In a way, these facilities provide a kind of fall back or Plan-B if things go horribly wrong in Kerala. Bamni Proteins helped us consolidate our production of Ossein (intermediate product in the making of gelatin) and Di Calcium phosphate (for poultry industry) but we have only basic infrastructure set up in Reva Proteins and there is considerable room for expansion. So,we have a contingency plan or de-risking with respect to production risk.
# NGIL has also forayed into medical products, how do you assess the progress?
We have one medical product called Wellness Collagen Peptide used in the treatment of Osteoarthritis. We are not marketing to the consumer but selling in bulk to various companies who manufacture and sell collagen products. There are around 40 companies who sell such products in retail in India and we cater to 90% of that market. We also export Collagen to USA, Thailand, Korea etc.
#Will NGIL as a strategy continue to be a B2b player? Are you catering to unorganised sectors in pharma, food or agriculture?
Yes, we will be a B2b player and if at all we enter B2C it will only be to let the industry know about the opportunities in that area. We also consciously cater to corporates and not unorganised players.
#Going ahead, what are the issues NGIL may face in your growth path?
Apart from the local issue in Kerala plant, we sometimes find it difficult to get quality raw materials, ie. crushed bone. This adds to our cleaning cost which has to be passed on to the buyer eroding our competitiveness. The ban on animal slaughter issue has not affected us on an extended basis but may cause problems for a short period- for a week or two.
#How do you view the global demand for gelatin and how does India fare?
The total global production of gelatin is 400,000 tons while India produces 20,000 tons or 5% of global output. Nitta Gelatin group with its combined operations in Japan, USA, Canada, India and China is the world’s fourth largest player in this industry. Globally, the industry is growing at 3-4% annually while in India it is 10%. In India, NGIL exports 55% of our production and two-third of our production is consumed by pharma industry. Globally, two-third of production is consumed by food industry. In emerging economies of India, China, Brazil, South Africa, demand growth for gelatin based products is higher due to urbanisation and rising disposable incomes
#Is Gelatin industry strong enough to fight disruption and could you tell about NGILs R&D capabilities?
I am quite proud to say historically Gelatin has responded to disruptions extremely well. To begin with gelatin was used in the making of adhesives. Then with the advent of synthetic adhesives, gelatin lost out. Then Photography industry became a major user of gelatin when films were in vogue but digital revolution caused disruption. The industry reinvented itself by catering to food and pharma industry. More disruptions are likely to come. But new opportunities are emerging- for eg. 3-D printing the binding material for which is high quality gelatin. We are quite strong in R&D in India and Japan which helps us find new opportunities, innovation in doing business and management.