Recent price hike announced by Gujarat Gas is not a good news for the industrial consumers, especially for the ceramic manufacturers in the Morbi cluster. Gujarat Gas Limited (GGL) has announced an increase of Rs 9.5/scm in industrial gas price (24%) which is likely to result in Rs 47 per scm cost to the Morbi consumers with effect from 5th October. This week’s hike comes post the recent price increase of Rs 4/scm on 24th August 2021 thus cumulative price increase has been massive 62% (or Rs 18/scm) in CY21.
Steep increase in the gas price leaves Morbi tiles manufacturers with limited options and now a price hike for tiles becomes inevitable as they are operating with thin margins with little scope for accommodating cost increase. According to analysts, tiles manufacturers may have increase price of tiles by 7-8% to absorb the latest gas price increase. This will make the cumulative price increase for the calendar year 18-20% which may impact the demand to an extent.
In the short term, non-Morbi manufacturers like Kajaria and Somany will be more competitive as Ras Gas (used by these manufacturers in some of their manufacturing facilities) price is slightly economical.
However, one need to wait and watch to see the possible impact of price hike on future export orders. If the price increase makes Indian exports less competitive, then it may force the exporters to divert their production to domestic market which is though a good news for consumers but manufacturers may have to deal the case of excess supply.