Demonetisation: Faced with cash crunch, 20 per cent ceramic units in Gujarat face shutdown

Daily losses due to the shutdown will be about Rs 20 crore

Written by Avinash Nair | Ahmedabad | Published:November 16, 2016 5:23 am

The ripples of demonetisation has forced 20 percent of 600-odd ceramic units of the country’s biggest ceramic cluster in Morbi to shut shop. These units have downed shutters as they found it difficult to arrange for the cash needed to pay the salaries of workers and transporters carrying raw material.

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“About 15-20 percent of the units have temporarily downed their shutters as they are unable to pay salaries or are not able to pay the truckers who bring in the raw material… The daily losses due to this shutdown will be around Rs 20 crore. But this is temporary. As soon as the cash crunch eases, we expect the situation to normalise,” says Nilesh Jetpariya, president Morbi Dhuva Glaze Tiles Association that belongs to an important cluster in Saurashtra that produces 1,600 million square metres per annum of ceramics of which products worth Rs 4,200 crore are exported.

Ceramic unit owners in Morbi admit in private that some of them are paying the old denominations of Rs 500 and Rs 1,000 as part-payments to daily wagers and to transporters. “From where can we bring so much of cash in new currency? So wherever possible we are making part payments in old currency,” says an owner of a unit.

According to Jetpariya, a minimum of 3,000 trucks visit Morbi daily, carrying raw material and about Rs 20,000 is paid in cash for each truck. “On an average, every unit needs at least Rs one lakh cash daily to pay the truckers. But when such an important decision (demonetisation) has been taken by the government, the industries will have to bear with it,” said Jetpariya, who was in Ahmedabad Tuesday to address a press conference on “Vibrant Ceramics Expo and Summit” scheduled to be held on December 16-18.

When asked about the cash component in day-to-dealings of the ceramic industry in Morbi, Jetpariya, who operates four units, said, “It is about 10-15 percent, which I believe is normal.” He, however, claimed that the salaries of workers are not cut when the units temporarily shut down.

Morbi accounts for four lakh direct jobs of which 40 per cent are daily-wagers or on contract. “Every unit in Morbi on an average needs cash of Rs 40 lakh to Rs one crore every month to run operations. Due to demonetisation, about 15-20 percent of the business has been affected,” reiterates K G Kundariya, president, Morbi Ceramics Associations.

“Paying our employees is an issue in the current circumstances. But we are ensuring that they do not suffer by getting in to an understanding with the local grocer to provide the employees with their daily requirements till the situation normalises. But even the retailers have a limit to helping us as they too need cash to operate,” Kundariya added.