COVID-19 crisis: Working capital crunch hits Gujarat ceramic cluster – The Financial Express

India’s largest ceramic industry cluster, situated in and around Morbi town situated in the western part of Gujarat, wouldn’t be able to start operations for at least a couple of months following severe working capital crunch and other issues, even after availing permission from the state government to start manufacturing activities.

“Nearly 900 units in and around Morbi town are closed even before the announcement of first phase of lockdown. Now the government is encouraging us to start production. But most of these units are facing scarcity of working capital as more than Rs 1,200 crore have been stuck since mid-March. We don’t see any possibility of payment from different stakeholders in near future even if lockdown would be lifted,” says Nilesh Jetparia, president of Morbi Ceramic Association, adding that in such critical situation, the industry would require some sort of package from banks to address the issue.

Moreover, there has been no demand from domestic as well as international markets and hence it would take at least couple of months to start production, he says. The ceramic industry of Morbi and elsewhere will have to wait for the revival of real-estate sector and only after that some demand would be generated, he added.

Many export-oriented units in Morbi had produced tiles and other sanitary items after they received export orders, but due to COVID-19 outbreak they are not able to supply goods which have already been manufactured for shipments in different countries, says Dinesh Sadsania, a leading exporter in Morbi. Nobody knows when these expensive products specially manufactured for export markets would be shipped to different countries, he lamented.

Nearly 25% to 30% of the Morbi ceramic cluster’s total production is being exported to over 170 countries across the world. Of the total export, nearly 35-40% is being exported to Middle-East countries. According to Sadsadia, due to holy month of Ramzan, markets in Muslim-dominated countries would remain close till May 25, 2020. Against the annual turnover of around Rs 45,000 crore, the cluster’s value wise exports stands at approximately Rs 13,000 crores.

“In domestic market ceramic units give up to five months credit to dealers. Huge amount of Morbi based units stuck with dealers. Looking to years of business relations, we can’t pressurise dealers to pay money instantly as they are also facing financial crunch in current situation,” he added.

Sources in the industry also foreseeing issues related to transportations as well as migrant labourers who have gone to their home-state following lockdown. Owners of ceramic units are giving ration to those workers and their families who decided not to return to their natives and instead preferred to stay at Morbi.