With natural gas prices showing no signs of abating, tiles manufacturers in Morbi are looking for ways and means to reduce costs to remain competitive in the market. According to the latest reports, nearly 170 tiles manufacturers have shifted to propane gas to contain the cost of production as gas constitutes 25-30% of the production cost.
Another 150 tiles manufacturers are likely to shift to propane gas in the next six months. In other words, about 300 manufacturers will be using propane/LPG gas by the end of this calendar year. Currently, propane prices are Rs 5-6 per scm lower than natural gas. The industry expects these to fall by an additional Rs 8 in July. Currently, 2mn scmd of volumes have shifted to propane; the industry expects 4.5mn scmd to shift over the next 4-6 months.
Propane gas is not new to Morbi tiles manufacturers. In 2006, Morbi had 130 plants – all used propane. They then shifted to coal, and afterwards, to natural gas. In FY21, 100 plants were using propane gas. The cost of installation of propane/LPG tanks is Rs 10mn (60% is the plant cost and 40% is construction and other cost). LNG tank installation cost is Rs 25mn.
However, propane and LPG is on a cash-and-carry model while Gujarat Gas, the natural gas supplier, offers 15 days credit on the back of a bank guarantee. Currently, Reliance and IOC have 80% share for propane.