Environmentalists have expressed their apprehension about the effectiveness of recent order of the National Green Tribunal, Delhi bench (NGT), 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 has not been very effective.
According to one estimate, though 81% of ceramic units in Morbi are equipped to use natural gas, bulk of them using coal gasifiers due to cost advantage. It should be noted that coal gasifiers is 25-30% cheaper than gas. If these units were to shift to PNG, their stress will intensify as cost of production will increase by 3-5%. The industry is struggling to come out of intensive price competition and it may be a difficult proposition to pass on the latest cost increase due to switch over to natural gas. Further, cost increase will further intensify the working capital stress of the most of the units post IL&FS crisis. Most importantly, Morbi players will have to move to formal/organised channels as they were purchasing coal in cash. It is believed that the unorganised players might take a price hike to offset the cost increase which will further reduce the price differential.
However, industry experts believe that present NGT order coupled with stricter implementation of GST and E-Way Bill regulations would augur well for organised players as the cost of doing business outside regulation will increase significantly.