This Indian sector has been ravaged by the Middle East fire, a ₹53,000-crore industry in dire straits
Middle East tensions and gas supply cuts have severely affected Morbi's tile industry. Production has stalled, costs have risen, and exports have been impacted, putting significant pressure on this ₹53,000 crore sector.
Despite being nearly 2,000 kilometers from the Strait of Hormuz, the tile industry in Morbi, Gujarat, is clearly feeling the impact. Production at many factories has either stopped or significantly reduced due to gas supply cuts.
Companies are increasing prices
Major companies like Asian Granito and NITCO have decided to impose a fuel surcharge of up to 5% to address rising fuel costs.
According to Asian Granito, the company will absorb most of the increased costs until March 31st, but a 5% fuel surcharge has been implemented starting March 18th.
Direct impact on production
Gas is a crucial input in the tile industry, especially for kilns. Gas shortages are impacting production cycles and increasing costs. NITCO says this will pressure profit margins and disrupt work schedules.
Some companies are less affected
Companies like Kerakoll report that they are not solely dependent on natural gas, so their production is currently normal. They are using alternative fuels.
Exports also affected
According to CRISIL, India's ₹53,000 crore tile industry could face a major setback. Total revenue could decline by 12% and exports by 67% in FY26.
Ongoing tensions in the Middle East and disruptions to shipping routes have led to delivery delays and increased costs. Exports account for approximately 40% of revenue, of which the Middle East accounts for 15%.
Increased shipping and logistics costs
Freight costs have risen by 4550% and insurance by 2530%, placing additional burden on companies. Furthermore, fixed costs are also being borne due to factory closures.
What next?
If this crisis continues for a long time, the earnings of companies may fall by up to 78% every month and profits may also decrease.
Big players in better position
Large companies like Kajaria Ceramics and Somany Ceramics use a variety of fuels (LPG, LNG, coal, etc.) and have plants located in different parts of the country, so they are better able to weather this crisis.
The gas supply crisis has hit Morbi's tile industry hard. Smaller units are particularly affected, while larger companies are still recovering. If the situation doesn't improve soon, prices could rise further, and pressure on the industry will continue.