Ceramic producers complain about high PNG costs

Vol 11, PW 20 (21 Feb 08) Midstream & Downstream

Gujarat-based ceramic manufacturers in the industrial zone sprawling between Thangadh, Wankaner, Dhuva and Morvi are complaining that the high price of Piped Natural Gas (PNG) is hitting profits.

Over the past few months, the price of PNG supplied by GSPC Gas has fluctuated from Rs18 per cubic metre, to Rs16.75 per cubic metre, and then back up to Rs19 per cubic metre, where it stands today. "When PNG was supplied at Rs18 per cubic metre we were paying Rs10.8 lakh ($27,000)per day," Chunilal Kundaria of mid-size Morvi-based ceramic producer Antique Ceramics, tells PETROWATCH.

"When the price was revised to Rs16.75 per cubic metre we were paying Rs10.05 lakh per day ($26,250). Today we are paying Rs11.4 lakh ($28,720) per day, plus 12.5% VAT." Ceramic producers in Gujarat account for 2.45% of global production but today they are fighting a losing battle against cheap Chinese products, at home and abroad.

When Gujarat chief minister Narendra Modi inaugurated the Gujarat Gas Grid in December 2005, many of the 300 or so ceramic producing factories in this region expected to receive PNG at a more reasonable rate of Rs12 per cubic metre, enabling them to withstand Chinese competition. Fuel and power account for 75% of the ceramic production process cost.

"Before PNG arrived we were a one-kiln manufacturing unit," adds Kundaria. "Thinking that PNG would be cheaper we installed two more kilns, but today we are suffering." Antique Ceramics consumes around 60,000 cm/d and claims it is registering a daily loss of Rs1.4 lakh ($3500) by paying Rs19 per cubic metre, the new rate fixed by GSPC Gas.

"Cheaper gas would have helped us scale down our fuel cost," says Ganesh Patel, also of Antique Ceramics. "This would have helped us reduce overheads and help us export to international markets so we could compete with China's growing dominance in this sector."