Clay supply spat hits tile units

Indian tile manufacturers are currently facing a sharp rise in costs owing to the ongoing transport strike in Bikaner, Rajasthan.

Freight rates have risen by over 60 per cent for ball clay, an essential input for tiles which comes from the Bikaner region.

The industry said that since November 2004, costs across the industry had risen by Rs 75 crore for ball clay and could go up further by 40 per cent. This is expected to push the manufacturing margins to all-time lows.

Transporters bsed in Bikaner have sought a 50 per cent hike in freight costs and this has led to conflict with the Vyapar Udyog Mandal Sangarsh Samiti (VUMSS), a consortium of all clay suppliers also based in Bikaner.

This has resulted in suspension of ball clay dispatches to tile manufacturers across the country.

This has crippled supplies and has led to closure of several ceramic tile manufacturing units as the key raw material was missing.

The transporters' lobby mainly comprising truck owners have been trying to form a union and regulate all future truck movements.

The lobby has demanded regulation of freight costs on dispatches of clay made from Bikaner at Rs 1600 per tonne.

VUMSS has refused to accept this demand and instead demanded that freight costs be market driven rather than regulated.

This has led to a dead-lock. Bikaner suppliers ship more than 700,000 tonne of clay dispatches annually. Over 90 per cent of the clay is consumed by the Indian ceramic tile manufacturers.

Most of the deposits of ball clay are in Bikaner, with almost 90 per cent of the dispatches being sent from Bikaner.

Freight costs at present account for over three-fourths the cost of the raw-material price.

The present landed cost of clay from Bikaner is Rs 1300 per tonne in that the freight component is Rs 1030 per tonne while material costs inclusive of taxes is not more than Rs 260/t.

The transporters' demand to fix the cost of dispatches through the Union at Rs 1600/t would represent an increase of more than 50 per cent over the currently applicable freight cost.

The cost of the material has remained steady but the increase in freight will propel the overall price of clay to Rs 1860/t.

According to Vijay Aggarwal, chairman of the Indian Council of Ceramic Tiles and Sanitaryware (ICCTAS), "The transporters' demand will create havoc in the tile industry. Besides, this will promote a monopolistic situation with a cartel outlook to freight operations."

Clay, accounting for almost 70 per cent of the total product output, is a bulky commodity and manufacturers have to incur very high cost in transportation of the material from mines to manufacturing facility, he added.

The district administration of Bikaner has constituted a seven-member committee to solve the problem.

This committee will comprise of three government nominees and two representatives each from the truckers' lobby and the VUMSS.

However, neither of the warring parties have sent their representatives to meetings called by the district administration.