"If the government considers this under GST slab, the GST what we are paying right now will be 6% benefit to the industry," says Shailesh Vasnani, Vice President of Morbi Ceramic Association.
This saving could either fully benefit the industry or be partially absorbed by Gujarat Gas as additional margins.
In both scenarios, the industry stands to gain significantly from the GST rebate, potentially reducing gas prices by at least ₹2.5 per kg, given the current price of ₹45.
This is the verbatim transcript of the interview.
Q: In the industry is there more usage of gas coming from Gujarat Gas or propane, what is the pricing differential that you are seeing right now?
A: The propane is consumed by 40% of the total volume of Morbi and 60% of our volume goes to Gujarat gas. The pricing of Gujarat Gas is ₹45 standard cubic meter (SCM) landed to the company with the taxes and structure and propane gas is ₹1 cheaper than what we get from Gujarat Gas. But with this small marginal difference of ₹1, still our market or the Morbi industry would like to go with Gujarat Gas.
Q: Now coming to gas itself, could you give us a sense of the current average cost of gas for you when you are comparing it to the same time last year and going forward, how are you seeing gas prices pan out?
A: Compared to the last year, the current prices are less than by 12 to 15% and we had the current talks with Gujarat Gas as company's authority. For the next coming two, three months, they are targeting a little decline in the gas prices. The same with the propane, so the prices are not going to be high. But there will be a little decline in the gas prices and we are comfortable using Gujarat Gas in these prices.
Q: I wanted to understand, spot LNG prices are still going high. They did see a big decline in November, but from those levels they have surged. So is it basis the conversation that you have had with Gujarat Gas that they would go ahead and cut prices? Is it a surety or something that they have told you?
A: It's not about the surety, but when we talked about the spot price of the LPG and Gujarat Gas, they told that they will be comparing the pricing with the propane gas and they will be competitive with the propane gas also. And yes in the next 2-3 months’ propane gas will have some price cut and Gujarat Gas authorities are telling that will try to match their prices. It will be competitive to the industry in any case.
Q: One more important development that the industry is looking forward to that we understand is that there is a proposal to bring natural gas under GST. Could you give us a sense of you know how the current dynamics work and do you benefit and if you could explain to us in a quantifiable manner how is it that you would benefit if that particular proposal does fructify?
A: If the government considers this under GST slab, the GST what we are paying right now will be 6% benefit to the industry. Now the 6% saving either could be going to the industry fully or partially it could be absorbed by Gujarat Gas as their additional margins. But in both the conditions, the industry has a big benefit by getting this GST because we are already paying the GST to the government and we can get the 6% rebate back. So 6% is a huge value when you talk about the price at ₹45 level, it will be at least ₹2.5 per kg cut down on gas price.
Read Here |Rate rationlisation likely to be top priority for GST Council in FY25
Q: So is there any rate that industry is expecting as well, 12% or 18% have there has there been any indication on that? The GST rate on gas has there been any indication on that because I know discussions are going on as well?
A: The indications are by 6% not 12% on gas.
Q: Wanted to understand how is demand looking right now, there were some reports are suggested exports are under pressure, has that recovered?
A: Let me tell you about the exports figure. Last year, 2022-23, the exports were ₹16,000 crore, ceramic tiles industry's total exports. But last year, we have closed at ₹18,700 crore. So it's a rise of 15% in the exports from a year back. So we cannot say it is declining, it is growing at the speed of 15% to 17%. This year also, we are forecasting ₹21,000 crore of exports. So it is a growing market.
Q: Could you give breakup in terms of the total industry output, what is it that is going to the domestic market and what would be the proportion that is going to export market and which market is actually growing higher for you or faster for you?
A: From the total market size, let me consider the total market size is a targeted to be ₹75,000 crore, ceramic tiles industry in the whole. From this ₹75,000 crore, ₹19,000 goes to the global market and rest ₹56,000 goes to the domestic market. So the ratio is 25 is of global market, 75 is domestic. Now as I told you, the growth in the export market is seen 15 to 17% and the domestic market growth is not more than 10-12%. So when we talk about the comparison of the growth, exports are growing a little higher pace. But the proportion of the domestic market is still 75%. So, we cannot even lose or we cannot have our loose hands on the domestic market even today.
Q: You spoke about exports doing well. There were reports of US imposing duty on tiles from India. Do you think that's a possibility or that was just election-related noise earlier?
A: There's a big possibility because the manufacturers from USA has already proposed this anti-dumping duty towards Indian companies. And the department has already started working on it. But yes, the bad part is it may be having an import duty from the Indian goods. But the good part is our total business, what goes to US, is not more than 9% to 10% from a total volume of ₹19,000 crore.
Also Read |Reduce GST on CNG and flex fuel two wheelers – Auto industry to new NDA govt
