Tile-makers' unsold stocks worth Rs 1,500 cr

As a result of the slowdown in the economy – especially in the real estate sector – and the consequent reduction in demand, the ceramics industry in Morbi, Gujarat, is saddled with unsold stocks of finished goods worth Rs 1,500 crore.

Morbi is one of the largest clusters of ceramic tile-makers in India. Increases in raw material and gas prices have also had an impact on the cost of production, adding to the industry’s woes.

“The weak monsoon and the overall slowdown in the economy have led to a slump in the demand for ceramic products after June this year. As a result, stocks valued at about toRs 1,500 crore have piled up with ceramic units in Morbi town, which houses a majority of the country’s ceramic units,” said M P Shorya, secretary of the Morbi-Dhuva Glaze Tiles Association.

According to him, after June the demand for ceramics has declined by 50 per cent, forcing manufacturers to cut working hours by almost half. At fault is mainly the slowdown in the realty sector, the chief source of business for the ceramic industry.

“We had expected good orders in June from the real estate sector but due to the erratic monsoon we lost hope. Now we are hoping that after Diwali or in December the demand may resume. Till than we have no choice but to stock our products,” said Shorya.

Following the increase in prices of gas and raw materials, Morbi-based ceramics manufacturers had increased prices by 12 per cent. However, this created more trouble for the industry.

The Morbi-Dhuva Glaze Tiles Association is considering seeking a relaxation in taxes from the state and Central governments. “We will demand relaxation in VAT and excise duty, ” said Shorya.

Veljibhai Patel, president of the Gujarat Wall Tiles Manufacturing Association, added that when demand resumes the industry may have to reduce prices to clear stocks.

Due to the pile-up of stocks small manufacturers have also trimmed their workforce, some by nearly 15 per cent.

There are some 750 ceramic products manufacturers in India, of which more than 500 are located in Morbi. The industry’s annual revenues are estimated at Rs 10,000 crore, with Gujarat-based units contributing Rs 7,000-8,000 crore. The industry gives direct and indirect employment to over 600,000 people.