Gujarat roller flour mills face threat of closure

High wheat prices, reduced profit margins may force 60 units to down shutters

Sixty small and medium-sized roller flour mills in Gujarat are facing closure owing to high wheat prices and increase in input costs, including freight and energy charges. Adding to their woes is the fact that the high cost of inputs has adversely affected their competitiveness vis-a-vis mills from neighbouring states.

Industry sources hinted that if prices continued to stay high, companies would incur losses, prompting many of them to down shutters. Roller mills supply flour to bakers, confectioners and traders in the state.

“Production costs have gone up owing to persistently high wheat prices. Flour millers from neighbouring states – including Madhya Pradesh and Rajasthan – have made competition tough, since they have access to cheaper wheat and can sell finished products (flour) at cheaper rates in Gujarat markets,” said Ramesh Shroff, former president, Gujarat Roller Flour Mills’ Association (GRFMA).

“Such a situation has caused margins to shrink and companies to either incur losses or shut operations. By the end of this financial year, we fear that about 60 mills will close down,” he said.

Roller flour mills, which grind wheat to make fine flour for bakers and confectioners, are largely dependent on wheat supplies from the Food Corporation of India (FCI). FCI sells wheat through open market sales to these bulk consumers. Gujarat’s roller flour millers consume around 60,000 tonnes of wheat a month.

“Recently, international wheat prices had firmed up. The open export policy of the government and easy access to ports led to export of most of Gujarat’s local produce (of wheat). This forces the state’s roller flour millers to look for wheat supplies from FCI, which adds freight and state taxes over and above the base price of wheat,” said Shrichand Bhalchandani of Empire Flour Mills, a leading flour miller in Rajkot.

Owing to costly inputs, most units have lost their competitiveness and suspended operations over the past year. Industry sources said the base price for wheat has touched Rs 1,620 per quintal in recent weeks.

“The final price works out to around Rs 1,730 per quintal. This is about Rs 150-200 higher than what is sold in Madhya Pradesh or Rajasthan. This disparity in prices affects units in Gujarat adversely,” said Shroff, who also owns a milling unit in Ahmedabad.

While millers in other states have been able to sell their finished products at Rs 1,720 per quintal (mill delivery) in Gujarat, units in the state find it difficult to match the prices of finished products.

“There is a need to have a uniform price of wheat for flour millers across the country. Also, there is inconsistency in FCI’s policies, which is hurting the interests of the industry,” said Bhalchandani, who is also vice-president of the GRFMA.

According to industry estimates, over 75 roller flour mills are situated in clusters across the state. Ahmedabad, Rajkot, Bhavnagar, Surat, Vadodara, Godhra and Dahod are some of the major clusters where roller flour mills are located. Most units are medium-sized, with a capacity of about 40 tonnes per day. However, some are big, with a daily milling capacity of 100 tonnes.

“The industry has an annual turnover of Rs 1,000-1,200 crore. But this financial year, we foresee huge losses for companies and the industry will be able to reach a turnover of only Rs 600-700 crore,” said Shroff.