New registration norms by Saudi add to Morbi tile cluster’s woes

13/10/2019

Ahmedabad: Woes for the Morbi-based ceramic tile manufacturing cluster of Gujarat, one of the largest in the country, are far from over.
If the National Green Tribunal (NGT) order earlier this year to move from fossil fuel-based manufacturing process to carbon friendly fuel impacted its working capital amidst sluggish economy, now international developments have affected the tile manufacturing and exporting cluster in Morbi.
A fortnight ago, the Saudi Arabian government changed technical requirements for suppliers of ceramic tiles, forcing the units in Morbi to apply for certification for valid exports. What makes it worse is that, so far, only two have bagged such a certification, forcing those left out and heavily dependent on the country for revenue to mull shutdown.
According to Nilesh Jetpariya, president of Morbi Ceramics Association, unlike earlier when ceramic tiles and sanitaryware manufacturers were free to export to the Middle East region, Saudi Arabia Standardisation Organisation has now mandated registration for all exporters.
"The registration not only costs about Rs 18 lakh but the also takes around 1-1.5 months to be completed. Roughly half of the 800-odd units export to Saudi Arabia but only two have bagged the certification so far. If the registration takes time or the other units don't bag the certification then it could severely affect exports," said Jetpariya.
The largest in the country, Morbi's ceramic tiles and sanitaryware manufacturing cluster pegs its turnover at around Rs 42,000 crore. Exports, which used to contribute around 40 per cent couple of years ago, today stand at 25-30 per cent of the total turnover. It is here that Saudi Arabia garners significance as it is one of the largest importer from the region, along with Europe and US.
Other exporting destinations for Morbi include Brazil, Africa and South Asia.
Already, capacity utilisation at the cluster is strained. According to industry sources, capacity utilisation is already down by 25-30 per cent owing to sluggish domestic and international economy. Plus, demonetisation and Goods and Services Tax (GST) had begun affecting the cluster's working capital, with the NGT order in 2019 adding another blow.
Earlier this year, NGT had ordered shutdown of all ceramic units that ran on coal gasifiers, forcing the units in the Morbi cluster to switch to liquified natural gas (LNG) or piped natural gas (PNG), paving way for Gujarat Gas to enhance its industry supply.
"All the units have shifted to natural gas. But if the certification challenge in Saudi Arabia persists, the industry's capacity utilisation could fall further to 40 per cent in near future," Jetpariya added.
Meanwhile, the export crisis also seems to have impacted Gujarat Gas' supply to the ceramic tiles manufacturing cluster in Morbi and nearby areas. According to industry sources, gas supply to the region has been down by 10-15 per cent since a fortnight.

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