Home Industry Trends Tile makers flooded with bad news in 2019

Tile makers flooded with bad news in 2019

To put it in simple words, it was a bad year for tiles manufacturers in the country and especially for those in Morbi cluster in Gujarat. Looking at the industry one can conclude that problems don’t come as a single spy but always come in battalions. It was a year where the industry went on getting bad news one after the other with no immediate recovery in sight for the fortunes of the industry.

Switch over to natural gas mandatory

It all started with National Green Tribunal, Delhi bench (NGT) ruling in February. NGT had ordered to shutdown all ceramic units at Morbi and Wankaner that run on coal gasifier. It may be recalled here that in June last year, Gujarat High Court had passed an order directing the Gujarat Pollution Control Board (GPCB) to close ceramic manufacturing units using coal based gasifiers located in Morbi within stipulated time limits, but the implementation had not been very effective then. However, this time, all the units which had been using coal gasifiers have either switched over to natural gas or have completely shut down their units.

GHC confirms ban coal gasifiers

In November, the Gujarat High court (GHC) in its order disposed of all the petitions that had sought directions to the GPCB to allow usage of type ‘D’ coal gasifiers. The GHC decision thus puts an end to use of coal gasifiers of any type, whether old or new technology, in the Morbi-Wankaner cluster. As per the GHC verdict, Type-A gasifiers should be dismantled while Type-B should be shut down immediately and dismantled safely. With Type-C gasifiers generating and accumulating condensate wastewater and Type-D generating coal tar and contaminated filter media, these gasifiers too should not be allowed to operate as per the verdict. Type-E gasifiers, which generate condensate wastewater and coal tar in small amounts, have also been banned.

Killer penalty

The Gujarat State Pollution Control Board (GPCB) fined 608 ceramic units at Morbi with a total penalty of Rs 400 crore. The fine is recovery of the retrospective environmental impact, which is calculated at the rate of Rs 5,000 per day and is chargeable on the number of days from the start of using the coal gasifier till shutting them down completely. In July, the National Green Tribunal (NGT) had directed the Central Pollution Control Board (CPCB) to assess the compensation to be recovered from polluting units for the last five years. The order further stated that the compensation should be due to cost of restoration and cost of damage to public health and environment and other deterrence elements.

No bank finance

Banks have turned negative towards tiles industry and no new loans are being sanctioned currently. Some players are complaining that banks have stopped lending even for working capital which may push the industry further into bigger trouble. Non-Banking Finance Companies (NBFCs) were the main source of funding for the tile manufacturers, especially for those in unorganised sector. However, after IL&FS fiasco NBFCs faced liquidity crunch last year forcing them to cut/stop lending to tiles manufacturers. With banks too tightening their purse strings towards the industry, most of the small and marginal players see a bleak future.

Parting gift from GCC

As the year end approached there was a parting gift from the Gulf Cooperation Council (GCC), a political and economic union of all Arab states. GCC issued an interim order to impose anti-dumping duty (ADD) ranging from 40%-106% on ceramic products imported from India. The order has come into effect from 1st December 2019. According to industry sources, most of the exporters fall under 42.9% anti-dumping duty as against their Chinese counterparts facing 24% duty, which will lead to Morbi players losing out on competition to Chinese players. Out of 800 and odd units in Morbi, 200 had sent samples of their products to GCC during their investigation in November2018, and these companies will be facing 42.9% duty, while the rest of the manufacturers will have to shell out 80-100% duty.

According to industry sources, 80-100 plants have been shut in Morbi, Gujarat, post GST and the NGT ruling, which have made it difficult for unorganised players to survive. According to some players, at least 50 units may closedown in near future if the situation continues like this.

Ongoing slowdown in real estate industry has already its impact on tiles industry which sees lesser growth in volume in the coming months than had earlier estimated. In the middle of the year, industry leaders were hopeful of the industry clocking double digit growth despite being pitted against heavy odds. However, as the year progressed pessimism slowly started overpowering optimism and now the industry is settled for a mediocre growth of 5% or less.

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