Tile makers see meagre gains from recent gas price cuts

livemint.com:

MUMBAI : Tile manufacturers have warned that the recent gas price cuts by city gas distribution (CGD) companies like Mahanagar Gas Ltd, Indraprastha Gas Ltd and Gujarat Gas Ltd are unlikely to result into significant margin gains for them. Gas accounts for a significant portion of the overall expenses for tile makers. So, lower gas prices should be a reprieve for tile manufacturers such as Kajaria Ceramics and Somany Ceramics, which use it to fuel their kilns.

But tile makers have advised caution as the advantage may not be substantial. Ashok Kajaria, chairman and managing director of Kajaria Ceramics, told Mint that gas cost is 25% of its total production cost. “But the recent price reductions are barely meaningful when compared to the 17% price hike by Gujarat Gas Ltd since August 2023," he said.

Mahanagar Gas and Indraprastha Gas both reduced prices by ₹2.5 per kg each on the back of the recent softening of LNG prices, while Gujarat Gas cut its Morbi industrial prices by ₹3.9 per standard cubic metre (scm). Morbi is a hub for tile makers. Nilesh Jetpariya, the former president of Morbi Ceramic Association, said that the recent price reduction would not have a major impact.

He highlighted that Gujarat Gas cut prices by a mere ₹3.9 per standard cubic metre (scm), much lower than the anticipated ₹10. Jetpariya went on to explain that “a substantial reduction would require manufacturers to pass it on to customers. Since the cut is small, it can be absorbed which would lead to better profitability for tile manufacturers".