Price hike by Morbi ceramic tiles manufacturers may bring cheers among the organised sector tiles manufacturers in the country as the move will narrow down the price difference between tiles manufactured in organised and unorganised sector. Before the proposed price hike, price difference between the tiles manufactured by two segments of the industry was as high as 25%. Morbi based tiles manufacturers had indicated last month their plans to hike prices of Ceramics by 10%+ and Vitrified tiles by 5-7%. According to branded tiles manufacturers price hike will bring down the price gap between branded and unbranded tiles and make the former more attractive for buyers.
Morbi manufacturers are forced to implement price hike after the National Gas Tribunal banned the use of coal gasifiers in the production of tiles. This has forced the Morbi tiles manufacturers to switch over to natural gas in the production which in turn will increase their cost of production by 10-15%. Further, Morbi players are also facing working capital challenges with the receivables days standing at 130-150 as against earlier 65 days.
Due to ban imposed by NGT on using coal gasifiers, nearly 400 manufacturers were reportedly affected by the order (Read: https://sawdust.online/2020/news/switch-over-to-natural-gas-at-morbi-has-started/). According to available reports some have already started switching over to natural gas. Also, before switching over, some of the plants have closed down their units temporarily for 1-2 weeks.
The Tiles Association of Morbi has not yet moved the Supreme Court appealing against the order. Industry sources are sceptical about the Supreme Court allowing the use of coal gasifiers given its strict stance on implementing pollution control norms.
Switch over to natural gas and consequent cost escalation may take away the cost advantage enjoyed by nearly 400 tiles manufacturers in Morbi. This may eventually lead to consolidation in the industry and market share gain for the tiles manufacturers in the organised sector.