Raw material prices, dwindling order volumes, rising freight costs have dramatically impacted dispatches in the manufacturing sector of Gujarat. Clearly, the number of e-way bills generated have declined in November by one-third. According to the state commercial tax department, 67.94 lakh e-way bills were generated in November — down 33% against 1.01 crore e-way bills in October.
State government officials attribute the decline to closure of manufacturing units during Diwali. However, industry stakeholders further claim that overall production and consequently dispatches took a hit in Gujarat in November due to skyrocketing coal and raw material prices.
Explaining this, Milind Torawane, state commercial tax commissioner, said, “During the Diwali holidays, businesses were closed and as a consequence, the business activity was less. Moreover, due to input cost increase and container shortage, dispatches have been impacted including those for exports. Therefore, e-way bill numbers declined in November. The massive surge in e-way bill generation in October was largely due to pent-up demand ahead of the festive season.”
The number of e-way bills generated, in fact, declined marginally by 3% as compared to 70.1 lakh e-way bills generated in November 2020 as well. However, most part of November reflected a shutdown due to Diwali and a surge in Covid-19 cases soon after the festive season.
Pathik Patwari, senior vice-president, Gujarat Chamber of Commerce and Industry, said, “Raw material prices were high and so were freight costs, due to which there were massive supply chain disruptions. Moreover, due to increased fuel prices, even transport movement was affected. Diwali holiday season also led to closure of industries for about five days and as a consequence, overall e-way bill generations declined.”
A raw deal for apparel manufacturers
With yarn getting costlier and job charges for textile processing going up, apparel makers downsized production significantly after Diwali. Estimates by Gujarat Garment Manufacturers’ Association (GGMA) indicate that apparel makers are operating at 50% capacity since a week before Diwali. “Pent-up demand did drive sales significantly in October. However, just ahead of Diwali, fresh order volumes nosedived. Sales of festive and wedding apparel were decent since then whereas for denims, casual and formal wear declined. With raw material costs soaring, manufacturers have curtailed production,” said Arpan Shah, honorary treasurer, GGMA.
Foundries remained shut for a fortnight
Foundries which manufacture metal castings remained shut for at least a fortnight over and above the Diwali break in November. “Reeling under extreme cost pressures with rise in prices of coal as well as pig iron — a key raw material for manufacturing metal castings, foundries are facing acute working capital shortage and as a result, are forced to curtail or shut production,” said Subodh Panchal, past president, Institute of Indian Foundrymen (IIF). Gujarat is home to at least 2,500 foundries which are mainly concentrated in Ahmedabad, Vadodara and Rajkot and have a cumulative installed capacity of some 5-lakh tonne per month, according to IIF estimates. “With units remaining shut, dispatches are bound to be affected and as a result, e-way bill generation is bound to be impacted,” said Panchal. Some 7,000 foundries and other engineering units are also observing a day’s shutdown on December 20 to protest the dramatic surge in price of steel, pig iron and other metals.
Freight dampens exports of plastic products
Spiralling raw material prices coupled with very high ocean freight have discouraged plastic products’ exports as well as domestic demand. As a result, production has been scaled down, which has brought down dispatches. “I have not received any export orders in the past two months. Ocean freight has gone so high that buyers are unable to procure goods. They place orders only when it is inevitable,” said an Ahmedabad-based plastic products manufacturer. Even high volatility in raw material prices is further discouraging manufacturers to stockpile raw materials in anticipation of the future demand. “Overall, manufacturers are procuring raw material in tandem with the orders in hand,” the manufacturers added.
Tile dispatches decrease 40%
The dispatches from India’s largest ceramic tile cluster in Morbi have taken a beating with tile prices going up in the past few months. The price rise has affected demand and consequently the production has slowed down, said ceramic tile makers. “The loading and unloading of goods, both raw material and finished goods, plummeted by 40% in November. For example: If previously 100 trucks were loaded every day in Morbi, only 60 were loaded in November daily. Buyers are in wait and watch mode as the prices of ceramic tile have firmed up,” said Nilesh Jetpariya, president, wall tiles division, Morbi Ceramic Association. Surge in natural gas prices combined with a surge in coal and transportation rates as well as raw material prices have resulted in various tile prices going up by 30-40% over the past six months.
Also Read:
The supply chain crisis has dominated the news headlines for a while now. Will the new year bring some changes or will the situation become worse?
Global supply chains that ran efficiently for years broke down in 2021 as factories, ports and freight yards buckled under the weight of surging orders.