The Hindu Business Line : Foundry units in tight spot over rise in pig iron prices

NOTWITHSTANDING the steep rise in the prices of pig iron over the last 12 months, the sudden upswing in prices between December 2003 and January 2004 has come as a rude shock to the foundry sector.

Unable to withstand the onslaught of rising prices of steel inputs, a number of units have already downed shutters in the last one month. Industry insiders are apprehensive of the future.

While appealing to the powers that be to save the industry from this unexpected predicament, the Southern India Engineering Manufacturers' Association (SIEMA) has suggested the need to formalise a discipline for the price increase mechanism.

The landed cost of pig iron had swelled by 82 per cent from around Rs 10,300 per tonne for direct purchase in January 2003 to over Rs 15,750 per tonne in December 2003. The prices further shot up by another Rs 2,700-3,000 per tonne to Rs 18,750 from January 14.

Despite the announcement of five per cent reduction in customs duty for steam coal and removal of special additional duty on imported coal in the mini Budget, the steel producers had taken other dependent manufacturers for a ride by forming a cartel and hiking the price without assigning any reason, Mr G. Rajendran, President, SIEMA, alleged.

Incidentally, the foundries in this region had started to look up only in 2002-03 after a prolonged recession. Numbering around 400 and catering to the needs of casting components of most engineering industries, these units are once again in a tight spot.

According to Mr Rajendran, the export earnings from the engineering industries in this region accounted for Rs 1,400 crore.

The unprecedented increase in the price of inputs, he said, could cause a serious setback in forex earnings.