Morbi’s ceramic industry is gradually recovering from the fuel supply disruptions caused by the Iran war, but rising fuel prices are casting a shadow over the sector’s rebound. Varmora Granito, one of the larger players, has restored 80% of its plants to propane, which is now available at an affordable price. The company’s Chairman and Managing Director, Bhavesh Varmora, noted that propane is currently priced at around ₹92 per standard cubic metre (SCM), compared to ₹85 per SCM for natural gas. However, the flexibility to switch between propane and natural gas remains crucial as fuel costs fluctuate.
The war in March severely disrupted energy supply chains, particularly through the Strait of Hormuz, leading to a temporary shutdown of production in Morbi. With propane supplies now restored, manufacturers are reassessing their fuel mix. Propane’s higher calorific value makes it a cost-effective choice despite its slightly higher price, but recent price increases have introduced new challenges. Kajaria Ceramics reported that propane prices rose twice in the past 15 days, including a significant jump of ₹12.5 per SCM over a few days, while natural gas prices fell by ₹5.5 per SCM, narrowing the price gap.
The volatility in fuel prices has prompted manufacturers to raise tile prices to offset higher production costs. Kajaria Ceramics reported price increases of 18-19% across product categories in Morbi, with broader increases estimated at 30-40% across the cluster. The impact has been less severe in the North and South, where gas is relatively cheaper, with price hikes of 12-13% at these facilities. The company is expanding its operations in these regions to take advantage of lower fuel costs.
Despite the recovery, production constraints persist. An estimated 40-50% of Morbi’s 500 manufacturing units remain non-operational. The uncertainty surrounding future fuel prices, particularly the lack of visibility on any potential decline, continues to pose challenges for the industry’s long-term stability.