Rising gas prices hurt industrial users

Industrial units refrain from passing on the price hike, fearing that they will lose customers in a competitive environment

Rising gas prices have put industrial users in a tight spot. Despite profit margins getting hurt, industrial units have refrained from passing on the price hike, fearing that they will lose customers in a competitive environment.

There are fewer orders, many companies are operating at reduced capacity and their sustenance is at stake. In this situation, most company proprietors feel that a dent in profitability is better than losing customers.

"Gas prices have jumped sharply over the past one year. Initially, we could pass on the price hike to our customers by increasing the prices of our products. But now there is a slowdown in demand and we may lose buyers if we hike the price as frequently as gas companies," said Babubhai Patel, owner of a chemicals unit in Ankleshwar.

Units in Ankleshwar get natural gas supplies from Gujarat Gas Company Ltd (GGCL), which was taken over by state-run Gujarat State Petroleum Corporation (GSPC) from the British energy player BG Group recently. GGCL charges gas-based units in Surat, Ankleshwar and Bharuch Rs 33.29 per SCM of gas.

The region has over 1,200 units spread across the chemicals, pesticides, pharmaceuticals, bulk drugs, petroleum products, engineering, textiles and plastics industries, and about 70 per cent of them use natural gas as a fuel.

"The situation is grave for industries. Most of their customers are large industries, which follow a 90-day payment cycle. Therefore, at times they face cash flow problems as well," said an official of the Ankleshwar Industries Association.

Anand and Vallabh Vidhyanagar are other industrial pockets where the impact of the gas price hike is felt the most.

"Business is weak. And the competition to grab the customer is such that we cannot hike prices even if our margins are affected. We feel that as long as the rupee volatility continues, the situation is likely to remain the same," said Jagdishbhai Patel, president of the Vitthal Udyognagar Industries Association -- a trade body comprising engineering and paints units near Vallabh Vidhanagar.

A cooperative gas company, Charotar Gas Sahakari Mandali Ltd, supplies natural gas to units in this region. Around 80 units operate on gas. Charotar Gas sources natural gas from GSPC.