As petrochem costs soar, 80% of Gujarat’s detergent MSMEs shut down, say associations

Notably, it is not just the price of LABSA, a petrochemical, that has gone up, but also Soda Ash and plastic packaging, that has led to such crushing pressure on the industry that they began shutting down from March 15, and had led to 80% of the units suspending production by April 11.

Speaking to The Indian Express, Naresh Jain, Chairman of Gujarat Small Scale Detergent Manufacturers Association (GSSDMA) termed the situation as an existential threat to these industries.

“We are facing a major problem in procurement of the major component of detergent, which is LABSA, also known as acid slurry. This is because the prices of this raw material have gone so high that the companies cannot purchase it at current rates as the finished product cannot be sold in the market at the equivalent price point change. This has led to a shutdown of 80% of the industry, leaving only those with previous stocks still functioning till the time the material lasts,” he said.

On the pricing problems, Jain said, “We were getting LABSA at about Rs135 per kg. After the war in West Asia began, the prices kept going up and today, it has reached Rs300 per kg. Further, the price of Soda Ash increased by Rs 6,000 per tonne, and plastic packaging cost went up by 50%. We could earlier provide 200-225 gram detergent for Rs10. Now we cannot even give 125 grams for Rs10.”

Supply chain disrupted

The supply chain in the detergent industry is that the petrochemical Linear Alkyl Benzene (LAB) is first produced in the refineries using Kerosene and Benzene. It is primarily manufactured by IOCL, Nirma Ltd and Reliance, said the association leaders.

Their product – LAB – is then sold to Sulfonators, in whose units it is “sulfonated” using Sulphuric Acid, resulting in the formation of LABSA. This is then sold to detergent manufacturing facilities.

At the detergent units, LABSA is mixed with Soda Ash, Silicate and fillers, to finally make detergent – the finished product – which is sold in the market.

Scale of Industry and Cost to Consumer

There are about 850 small scale detergent manufacturing units in Gujarat which employ approximately 30,000 workers. It accounts for 60% of the rural market and 15% of the urban market, the latter of which is dominated by the major companies and MNCs.

The production cost of detergent cakes cost about Rs 25,000-28,000 per tonne. When you add on 18% GST, packaging and transport costs, it finally reaches the consumer at Rs 40,000 per tonne or Rs 40 per kg.

Appeal to Government, Petrochem Cos

The Associations said, “The detergent industry associations humbly appeal to the government to intervene. If a 20% to 30% quota of raw materials is reserved specifically for MSME units, the industry could be revived. We also expect Acid Slurry (LABSA) manufacturers to act with humanity and provide supplies at reasonable rates. If a solution is not reached soon, the upcoming Diwali festival will be filled with darkness for thousands of workers.”