Announcing the decision on Tuesday, Minister of State for Industries Saurabh Patel told reporters that the move was to help small and medium units to increase their production and profitability. “It will prove a boost for this sector that is most affected by the current wave of economic meltdown,” he said.

Patel said the total production of lignite in the state was over 10 lakh MTs per month, with the mineral mines located in Bhavnagar and Matano Madh (Kutch) accounting for the highest lignite monthly yield of four lakh MTs and three lakh MTs, followed by two lakh MTs from Tadkeshwar and 1.60 lakh MTs from Rajpardi.

The state-owned Gujarat Mineral Development Corporation (GMDC) markets about 90 per cent of the lignite production to small and medium industries mainly engaged in textiles, ceramics, bricks and processing business.

“As evident from this sector, having attracted the highest number of investment proposals at the recent Vibrant Gujarat Global Investors’ Summit, the government’s main focus is on the small/medium industries in the state,” the minister added.

In response to a query, he said lignite rates vary on the basis of mineral quality. The rates of lignite being produced from the Rajpardi and Tadkeshwar mines are fixed at Rs 1,500 and Rs 1,400 per MT respectively, while that of being mined in Bhavnagar and Matano Madh is Rs 1,250 and Rs 1,000 per MT in that order.

Reacting to the development, Gujarat Congress unit spokesman Arjun Modhwadia said: “The Congress welcomes this decision. The government had no other option, but to reduce the rates in view of the falling demand of the mineral in the small and medium sectors.”

The prices in the fuel segment — oil, gas and coal — have started crashing globally. The present economic downturn has adversely affected even small and medium industries in the state, causing a sharp cut in the demand of lignite.