As others cut price Gujarat Gas increases it by 14%

Vol 12, PW 18 (12 Feb 09) Midstream & Downstream

Unlike its rivals cutting back their prices, BG-controlled retailer Gujarat Gas has surprised customers and competitors alike with a 14% hike! PETROWATCH learns Gujarat Gas, India’s largest private sector gas distribution company, raised prices to Rs11.50/cubic metre from Rs10.064/cubic metre, excluding VAT, effective February 1.

“This was the last thing we expected,â€‌ says Pramod Chaudhary, president of the South Gujarat Textile Processors Association, which represents 325 firms in the Gujarat industrial city of Surat. “It is very difficult to digest.

But what can we do We are helpless in front of Gujarat Gas and in turn Gujarat Gas is helpless in front of GAIL.â€‌ Gujarat Gas, we are told, has simply passed on higher transport costs from GAIL and an exchange rate charge on gas costs as the rupee has weakened more than 19% against the dollar over the past year.

“With the dollar appreciating, the cost of procurement for Gujarat Gas has gone up and we are now caught in the crossfire,â€‌ adds Ravindra Arya, a leading textile processor in the Kadodara-Jolva-Tatithaiya cluster of 103 textile mills, about 18-km east of Surat. With global recession deepening, textile manufacturers in India face a slump in new orders from customers in the US and Europe.

Any attempt, they argue, to pass on higher input (gas) costs to customers will see buyers switch to China or Bangladesh. “Energy input costs for Indian manufacturers are on the rise,â€‌ says Hetal Mehta, chairman of the Southern Gujarat Chamber of Commerce and Industry Energy Committee.

“But raising our prices is not an easy option.â€‌ Manufacturers in Gujarat, like in Andhra Pradesh and Maharashtra, say their only hope is the advent of gas supplies from D6 and lower gas prices for industrial users.

“The only silver lining will be Reliance gas from the KG Basin,â€‌ says a textile entrepreneur. “This will iron out all the problems we face.

â€‌ Gujarat Gas’ price hike for piped gas applies only to industrial customers.