Ahmedabad textile mills hit with lack of supply of lignite

Despite witnessing an increase in volumes, textile processing units in Ahmedabad are seeing their profitability affected due to the rising price of raw materials, especially lignite. Since March 1 textile processors have not got lignite from the Bhavnagar site of the Gujarat Mineral Development Corporation (GMDC).

As a result, they have to pay more for obtaining lignite from the Mata no Madh site of the GMDC causing an extra cost on top of increased costs of electricity as well as higher labour charges.

Around 28 per cent of the total cost of textile processing is accounted for by lignite which is used as a fuel for processing which the units largely source from the GMDC.

Naresh Sharma, former vice-president of the Ahmedabad Textile Processors’ Association (ATPA), said, “There has been an improvement in orders in the last month. The overall capacity utilization has increased between 60 per cent to 80 per cent in different companies. However, lignite has become costlier, and it is affecting production costs. Because of tough competition, processing units cannot pass on the price increase to customers. Despite improvement in orders, profitability is down because of higher production cost.”

Considered one of the country’s biggest cotton textile processing clusters, the Narol cluster in Ahmedabad has around 120 units with an installed capacity of around 2.5 crore metres per day.

“The GMDC has stopped the quota of Bhavnagar lignite from March. It was around Rs 1,000 cheaper than Mata no Madh lignite. GMDC recently reduced the price of Mata no Madh lignite, but it is still costlier than Bhavnagar lignite, which we used until February” a textile processing unit owner was quoted as saying.

GMDC managing director Roopwant Singh said, “Lignite mining at Tadkeshwar is temporarily closed, and the production at Bhavnagar mine is low as the works contract expires soon. We have lowered the prices of Mata no Madh lignite for buyers for the current fortnight to ensure they do not face higher prices. Bhavnagar lignite availability will be normal as soon as possible.”