Morbi, Gujrat: This is misleading,” Veljibhai Patel says about the boxes of tiles stacked to the roofs at factories in India’s ceramic tiles capital.
A crisis holds this sleepy little town in Kathiawar in a vice, home to over 200 small enterprises that produce some 70% of the country’s tiles.
“The inventory is not because the units have been flooded with orders but because there are no orders,” explains Patel, owner of Boss Ceramics and president of Morbi Dhuva Glaze Tile Manufacturers Association.
Losing sheen:A tile shop in Chawri Bazar, New Delhi. India ranks fifth among tile makers globally. (Photo: Ramesh Pathania/Mint)
It was not always like this. Morvi, about 280km west from state capital Ahmedabad, was a boomtown in the mid-90s, when small entrepreneurs started making ceramic tiles here and gave the big players a run for their money.
“The advantage we had over bigger players was pricing. When they were selling tiles for Rs400 per box, Morbi entrepreneurs were happy selling the same box for Rs150-200,” Patel remembers.
Eventually, established firms such as Nitco Tiles Ltd, Kajaria Ceramics Ltd, Somany Ceramics Ltd and Johnson Tiles, a brand of UK-based Norcros Group Holdings Ltd, yielded ground to the small and medium businesses here and even started to outsource their production to local units.
India ranks fifth among tile makers globally, with the unorganized sector accounting for 55% of the country’s total tile business, according to the Indian Council for Ceramic Tiles and Sanitaryware, an organization of tile makers.
Production of tiles stands at about 340 million sq. m a year, and annual turnover for the organized sector is about Rs2,865 crore, while it is about Rs3,500 crore for the unorganized sector, the council says.
Morbi and Himmatnagar, a town in northern Gujarat, now account for some 85% of India’s production.
This erstwhile capital of a small Saurashtra princely state today hosts as many as 144 units making wall tiles, 55 manufacturing floor tiles, and 20 producing vitrified tiles, says Patel.
Things have, however, gone from good to bad here. About two dozen units have already shut shop and another five are under the auctioneer’s hammer.
“Those who continue to make tiles are operating at less than half the capacity,” says Neville Patel, director of Ajanta Group, which produces vitrified tiles under the brand name Oreva. “We have cut down production from four lines to two.”
So what went wrong? The litany is long—ranging from rising costs and falling prices that are due to a huge influx of cheaper Chinese products.
“We are hit by higher taxes, fuel costs, transportation costs, lack of raw material, dumping of cheaper Chinese tiles into India, and to top it all, a slump in demand from construction,” says Becharbhai Patel, president of Morbi Chamber of Industry.
Morbi’s trouble began with lignite, an essential mineral to make tiles. Units here had easy access to the Panandhro mines in adjoining Kutch district, before the state government reserved all the lignite to fire power plants.
Tile makers are now forced to bring the mineral from the Rajpardi mines in Bharuch, some 500km away, which adds about Rs800 to every tonne of lignite they transport to their units.
Energy costs account for 45% of tile making that include natural gas or coal to fire the kilns, besides electricity. Soaring fuel costs have started hitting margins, says Becharbhai Patel.
Manufacturers says high taxes, that add another 25% to costs, are also hurting them badly. “We are not against taxes but it hits us, especially when we see Chinese products landing on Indian shores without any import duty imposed on them,” says Veljibhai Patel. “They are gradually cornering us.”
“There is no anti-dumping duty on Chinese wall tiles and they could cost anywhere between 30%-50% less compared with Indian products, depending on the type of tiles you want to import,” says an Ahmedabad-based trader in tiles who did not want to be named.
The average price of ceramic tiles, says Veljibhai Patel, is around Rs97-100 per sq. m, including taxes.
“If I sell a box for Rs110 in south India, the traders of Chinese tiles sell for Rs90. Obviously, the customer will go for the Chinese product.”
Chinese tile makers land their products by sea at ports in Kochi, Chennai, Vizag and Kolkata, allowing them to transport the tiles in bulk at low rates. The local tile industry struck work for 26 days in March to voice their grievances, but it hasn’t helped.
Only big manufacturers will be able to sail through, riding on deep pockets, says Veljibhai Patel. As for the rest, the tough times are set to continue.