Rising fuel cost takes toll on Surat's textile sector

Soaring fuel prices have hit hard the recession-affected textile industry of Surat.

"Fuel cost accounts for nearly 35 per cent of the total production cost in the textile industry. So it is natural that even a slight increase in fuel prices will hit the textile industry," an industry expert said.

"Coal, lignite and gas are the main fuels or energy sources for the industry. Coal prices have witnessed a steep jump of Rs 800 per tonne in the last 10 months. From Rs 2,400 per tonne in January, coal prices have shot up to Rs 3,200 per tonne at present," he said.

"Irregular and erratic transportation, and frequent hike in transportation charges are mainly responsible for the rise in coal prices. This has increased the production cost of the textile industry, thereby reducing profit margins," the expert said.

"Lignite has emerged as a useful alternative for coal, but its prices have also increased in recent months. There are two lignite mines in Gujarat - one at Rajpardi in Bharuch district and the second in Panendra in Kutch-Bhuj," he said.

"The price of lignite produced in Panendra was Rs 1,750 per tonne in January. This has increased to Rs 1,950 in August, and at present it is Rs 2,150. Similarly, the price of lignite produced in Rajpardi was Rs 1,450 per tonne in January. This has risen to Rs 1,500 in August, and has climbed up to Rs 1,650 at present," he said.

"The consumption of gas as an industrial fuel has also increased. But at the same time its price have continued to increase. Gas prices have more than doubled in the last six-seven years," he said.

"The Gujarat Gas Company is the only gas supplier in Surat. Due to its monopoly, the company has frequently hiked gas prices. In addition, the company has laid down strict terms in its agreements, which are not helping the textile industry either," the expert said. Another major concern for the textile industry is power charges.

"Electricity is mainly generated using coal and gas. Due to the increase in their prices, power rates have moved up steadily. The industries of Gujarat pay up to Rs 5.50 per unit of power, which is much higher than most other states. The textile industry has raised the issue several times, but the government is not ready to reduce power rates," he said.

"The soaring fuel prices as well as the high power tariff, are proving to be big obstacles in making the textile industry competitive. Things will be different in just over a month, when the General Agreement on Tariffs & Trade comes into force. The government needs to gear up and take some concrete steps before it is too late for the textile industry," he added.

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In a bind

• Fuel cost accounts for nearly 35% of the total production cost in the textile industry
• Coal prices have witnessed a jump of Rs 800 per tonne in the last 10 months
• The price of lignite has increased to Rs 2,150 against Rs 1,950 in August