Ahmedabad: Higher volatility and a recent uptrend in the price of natural gas have left Industries in Gujarat concerned about Cost pressureAccording to the Union Ministry of Petroleum and Natural Gas, the price of natural gas has increased by 8%, from 7.5 million British Thermal Units (MMBTU) in August last year to 8.51 MMBTU in August this year. With the rising prices, industries are facing a sharp increase in their production costs. This is especially true for ceramic and chemical manufacturers.
Since the Ceramic manufacturer in Morbi switched from coal gasifiers to gas gasifiers, any fluctuation in the natural Gas prices has had a major impact on the industry. “Ceramic manufacturers in Morbi consume an estimated 2.4 million cubic metres of gas every day. Gas costs account for 22 to 25 per cent of our total production costs. So a marginal increase in gas price will impact our balance sheets,” said KG Kundariya, former chairman of the Morbi Ceramics Association.
“Due to weak domestic demand, around 160 of the 800 plants in Morbi’s ceramics industry are currently not operational. Given the already low order volumes, high export costs and long payment cycles, a rise in gas prices can only hurt the business,” Kundariya added.
The situation of chemical manufacturers in the state is no different. “Since the Covid-19 pandemic, the chemical industry’s production capacity has been operating at only 40-60 per cent capacity due to falling demand and increasing inflationary pressures. Natural gas is widely used in the chemical industry to run boilers, which accounts for about 15 per cent of the total manufacturing cost. At a time when revenue sources have dried up and payment cycles are extended, any increase in input costs will affect the profitability of local manufacturers,” said Bhupendra Patel, chairman, Chemexcil Gujarat region.
“With every new expansion, manufacturers are increasingly encouraged by the Environmental Protection Agency to switch to gas-fired plants. Therefore, the industry’s dependence on gas is increasing. At such times, government intervention is important to bring prices under control,” Patel added.
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