Nearly 1,000 ceramic units in Gujarat to face additional burden of over Rs 100 crore/month

In the wake of recent hike in natural gas prices, nearly 1,000 ceramic units in Gujarat will have additional financial burden of more than Rs 100 crore per month at a time when the industry has started doing well in domestic as well as international markets after the Covid-led lockdown.

Gujarat Gas Limited (GGL), the sole supplier of natural gas to India’s biggest ceramic cluster near Morbi town in Saurashtra region as well as few units developed in North Gujarat region have hiked gas price by Rs 4 per square cubic meter (SCM).

“GGL has imposed new pricing overnight. It would impact the ceramic industry negatively as many units have already taken orders considering existing prices of natural gas. Now they will have to bear the additional cost and fulfill orders, especially export orders. It would impact the operating profitability of tile makers by 5-10%,” said Nilesh Jetparia, president of Morbi Ceramic Association.

Morbi’s per day consumption of natural gas is around 75 lakh cubic meter, he said, adding that with the increase in prices from Rs 24 per SCM to Rs 28, these units will have to bear extra cost of Rs 100 crore per month, said Jetparia, adding that the units with lower inventory capacities would suffer a lot as they will have to either fulfill the orders or cancel them.

Jetparia himself is one of the victims of the sudden hike in gas price. His customers in South Africa cancelled the orders of 300 containers as he decided to pass on increased cost of fuel on them. “We have requested GGL management as well as Gujarat’s energy minister Saurabh Patel to give prior notice of at least a fortnight before implementing new pricing. Already, Gujarat based ceramic units are facing tough competition from their Chinese and Spanish counterparts in international markets,” he added.

Though the natural gas prices are directly related to international prices of LNG, but GGL could have given some time to the industry at a time when Indian tilemakers are getting excellent export business due to heavy demand from overseas buyers, said Kamlesh Patel, managing director of Asian Granito India Limited (AGL), one of the top three ceramic companies in the country.

“Generally bigger players keep one and half months’ inventory of finished goods. Such players would absorb a sudden rise in gas prices. But smaller units will have to bear the additional financial burden,” said Patel.

The recent hike by GGL has brought the prices of natural gas at par with pre-Covid-19 level as it had reduced prices twice between June and September this year, said Bhavesh Varmora adding that from this point further price hike would definitely lessen Indian tile makers competitiveness in the global market.

Ceramic units in Gujarat provide employment to more than four lakh people. Against the annual turnover of Rs 45000 crore, Gujarat’s ceramic exports is nearly Rs 12000 crore. In wake of anti-China sentiment across the globe, Indian tile makers are getting resounding business from across the world. At present, these units are exporting ceramic products to more than 170 countries.