Gujarat Gas increases natural gas cost by Rs 11 for ceramic clusters

A notification from the Gujarat Gas stated that the revised basic gas price for ceramic and sanitaryware clusters in Morbi and Surendranagar will be revised to Rs 58 from November 1.

Gujarat Gas has increased natural gas prices for ceramic clusters of Morbi and Surendranagar by Rs 11 per standard cubic metre (SCM), effective from November 1.
This is second major hike in gas price for the cluster in less than a month and industry leaders say costlier gas will hit the dwindling exports further.

A notification from the Gujarat Gas (GG), the gas distribution subsidiary of the state government-owned Gujarat State Petroleum Corporation (GSPC), stated that the revised basic gas price for ceramic and sanitaryware clusters in Morbi and Surendranagar will be revised to Rs 58 from November 1.

Industry sources said that the effective price for industries will be more than Rs 61 per SCM after including value-added tax (VAT).

The GG notification ascribed the hike to an increase in prices of natural gas in the international market. “On account of substantial increase in natural gas price in international markets, company (GG) has revised the industrial gas price for MGO (minimum guaranteed offtake) Agreement…,” the notification stated.

On October 6, the GG had increased the price by Rs 10 per SCM. A month prior to that, the price was increased by Rs 5.

The Morbi Ceramics Association (MCA), a chamber of ceramic tiles and sanitaryware manufacturers in Morbi district, said the latest hike in price will hit the exports.

“Till around a year ago, when the gas price was Rs 24, Morbi used to export ceramic products worth Rs 2,450 crore per month. It dropped to Rs 1,200 per month as gas price was increased. It further came down to Rs 1,000 crore by August and as GG kept on increasing prices, it dropped to Rs 800 crore last month. October’s exports are likely to slump to Rs 500 crore,” said Nilesh Jetpariya, president of wall-tiles division of MCA.

Jetpariya said the GG’s policy of neither offering long-term contracts to ceramic factories nor notifying a hike in advance is hitting the credibility of industry. “Natural gas account for 35 per cent of production cost in this industry and big hikes leads to a substantial increase in production cost. This forces us to cancel overseas supply contracts…,” Jetpariya added.

He said that Morbi-Surendranagar ceramic cluster is the world’s largest natural gas consuming cluster but the monopoly of GG in supplying the fuel will hurt the industry in the long-term. “It is neither offering us long-term contract nor is the government allowing other gas distributors to enter this market or allow us to use alternate fuel. This is hurting the ceramic industry,” said Jetpariya.

GG offers monthly and three-month contracts to ceramic units. GG officers could not be contacted for a comment.

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