Gujarat Energy’s natural gas volumes to India’s biggest ceramic cluster in Morbi have nose-dived nearly 90 per cent in the last five months to around 1 million standard cubic metres per day (mmscmd), from a peak of 8.5 mmscmd during the supply disruption triggered by the Iran war, as improving propane availability has prompted manufacturers to switch back to the alternative fuel.
“Before the (Iran) war, the Morbi volumes (in February) were close to 2.5 mmscmd, then we went up to 8.5 mmscmd and now we are at 1 mmscmd,” a senior Gujarat Energy Official told investors recently. This sharp decline highlights the challenge facing the city gas distributor in retaining industrial customers as the economics of fuel switching shift in favour of propane. The company is now looking to strengthen its long-term liquefied natural gas (LNG) sourcing portfolio to offer more competitive prices and win back customers in the ceramic hub.
Morbi volumes had averaged 5.67 mmscmd in the first quarter of FY27, before moderating to around 3 mmscmd in the second quarter. Before the disruption in February, the company’s supplies to the cluster stood at around 2.5 mmscmd. Volumes subsequently rose from approximately 0.4 mmscmd in April to around 8-8.5 mmscmd during May and June, as manufacturers turned to natural gas amid a shortage of propane.
However, propane supplies have gradually improved since July, with manufacturers sourcing the fuel from countries including the US and Venezuela, among others. Gujarat Energy management said that against its current gas supplies of around 1 mmscmd, propane consumption in the cluster was equivalent to approximately 5.3-5.4 mmscmd of gas. The shift comes as manufacturers reassess their fuel mix following the disruption. Larger players such as Varmora Granito have moved a significant portion of their operations back to propane. The company’s chairman and managing director Bhavesh Varmora had earlier told businessline that around 80 per cent of its plants were operating on propane, which had become available at affordable prices. The company retains the flexibility to switch between propane and natural gas depending on availability and relative costs.
Gujarat Energy is now looking to address this competitive disadvantage through more competitive LNG procurement. “We are trying to build an LNG book which is competitive vis-a-vis propane and that is how we are trying to solve the propane riddle,” management told investors during the company’s recent earnings call. The company is targeting an LNG sourcing portfolio of around 4 million tonnes per annum (MTPA), with two recently signed contracts aggregating 0.8 MTPA forming part of efforts to strengthen its long-term supply position. Management said the additional sourcing would primarily help regain industrial customers lost in Morbi by offering them more stable prices over longer periods.
The company is also evaluating the development of propane infrastructure — which includes a propane import terminal in Gujarat — although management said competitively priced LNG procurement remained its preferred approach to competing with the alternative fuel. The current price differential between natural gas and propane was around ₹7-8 per standard cubic meter, compared with nearly ₹12 in September, according to management. The challenge is compounded by a broader contraction in Morbi’s ceramic industry. Higher freight costs and other operational pressures have weighed on the overall market, limiting the scope for a quick recovery in fuel demand.
Gujarat Energy is meanwhile looking to diversify its industrial gas demand beyond Morbi, targeting markets such as Rajkot, Surendranagar, Surat, Bharuch, Ankleshwar, Valsad and Dadra and Nagar Haveli. Its industrial PNG volumes stood at around 6 mmscmd in the second quarter of FY27, with the moderation from the previous quarter largely attributed to lower demand from Morbi.
Published on November 9, 2026
