Morbi ceramic industry to shut down from 27 November

Ahmedabad, 22 November 2013

Morbi based ceramic industries will shut down from 27 November to lodge their protest over GSPC gas price hike.

GSPC has increased gas price by 10%. Using gas as fuel has been made compulsory by the Gujarat high court in its recent order. GSPC is the only gas supplier active in this area, thanks to its pipeline here.

Representatives of ceramic industry yesterday met Gujarat Industry minister Saurabh Patel in Gandhinagar to discuss the gas price and supply issues. However their talk failed to bring any amicable solution. A meeting of Ceramic Industries Association was held today to discuss next line of actions. In the meeting, a decision was taken to shut down the units from 27 November. Morbi contributes 85% of ceramic production in India.

The whole issue:

-Ceramic industry wants government owned GSPC to give relief in recent hike of Rs. 4.17 in gas rates.

-If one-by-one certain number of units halt production for prescribed period, the government is ready to cut gas price hike by half.

-The state government has guaranteed 24 hours supply only after getting assurance on per unit monthly gas usage.

-Against suddenly increased demand of 25-30 lakh cubic meter gas, GSPC will be able to supply only 19 lakh cubic meter gas. GSPC wants assurance that 80% of gas supplied will be guarantedly utilized. GSPC has problem about what to do with the gas purchased for ceramic units from abroad if it is not utilized by ceramic units in matching quantity?

-According to one ceramic unit owner, the units need to scale up and scale down production as per the demand. Some time all units don’t work for 15-20 days period due to lack of demand. In such situation how industry can give bond to government and give assurance on guaranteed consumption of certain amount of gas?

-Another representation was on Rs. 2.5 price difference between Morbi and Than – two major centers of ceramic industry. Following this representation, GSPC has leveled the rates, but not by scaling down the price of gas supplied to Morbi, but by scaling up the price of gas supplied to Than.

-Unit owners say, they are already facing the problems of economic slowdown and Chinese dumping. There are more than 600 ceramic products units in Morbi, Dhuva and Than areas. Gas prices go up frequently. Gasefire option was 70% cheaper, but it has been banned by the Gujarat High Court follwing a public interest litigation over enviornmental issues. Now when usage of gas has been mandatory as per the High court order and GSPC has increased gas price, the industry is facing major crisis.

-GSPC says that LNG price hike is thanks to increased demand in winter. GSPC purcahses gas from Australia and Qatar. Due to winter, demand is up internationally. When international rate is high, GSPC can’t do much. While for other industries the company has increased gas price by Rs. 2.50, ceramic units need more gas and therefore hike is as high as Rs. 4.17. If all 600 units start using gas, the demand will be at around 25-30 lakh cubic meter, against which GSPC is able to supply only 19 lakh cubic meter.

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About the industry

The main products of this ceramic city are Vitrified tiles, Wall tiles, floor tiles, Quartz Stone, sanitaryware, roofing tiles and mosaic tiles.

8-A National Highway between Morbi and Wankaner is flanked by all the industries related to tiles manufacturing. A large number of small-scale ceramic pottery manufacturing units are also located around Thangadh. Thus Wankaner, Thangadh and Morbi form the Ceramic triangle. These units also cater to export market (Middle East, African Countries, Sri Lanka, Bangladesh, etc.). In the recent years Morbi has also became an important manufacturing outsourcing zone. Many leading ceramic companies like Kajaria ceramics, HR Johnson, Asian tiles and Somani Tiles are outsourcing their requirements from Morbi.

The region around Morbi (i.e. Wankaner, Dhuva, and Thangadh) is a virtually untapped ceramics zone. It is India’s newest and most promising ceramics production hub with scores of innovative and enthusiastic tile and sanitary ware manufacturers, all of which represent key future sales targets for equipment, raw materials and service suppliers. The pace of production capacity growth in this region has been explosive and this trend is set to continue for the foreseeable future.

By installing industrial gas line in this zone GSPC has fueled the growth of Indian tiles production segment. Gas is the key cost driving factor in production process of ceramic and vitrified tiles. Gas line has ensured continuous supply of this important input.

The vicinity of the city with major ports (such as Kandla and Mundra) also lowers down the transportation costs and thus helps exporters of ceramics from the region. The region will surely be one of Asia’s key driving forces over the next 10 years.