The Hindu Business Line : Coimbatore pump cos bet on monsoon to drive growth

THE pump industry in Coimbatore, which witnessed a demand recession last year due to extended monsoon and drought, expects that the normal monsoon predicted during the current year would lead to a demand revival, particularly in the southern markets.

Some of the leading pump manufacturers in the Coimbatore region have also resorted to price increase in respect of a range of pumpsets to partially offset the loss they had to bear because of the abnormal increase in the cost of raw materials during 2003-04, apart from resorting to other measures to absorb the increase in cost.

Speaking to Business Line today, Mr G. Rajendran, President, Southern India Engineering Manufacturers' Association (SIEMA), said some of the leading pump manufacturers have made a 7.5 per cent to 15 per cent increase in the price of a range of pumpsets following the advice given by his organisation. While some had done so in February itself, a few have done it with effect from April.

He said this has been done mainly because of the abnormal increase in the cost of raw material during the March 2003- March 2004 period. While the price of pig iron and Chinese coke had shot up by almost 200 per cent during this time, copper rod and wire price zoomed by 65 per cent and stainless steel sheet and rod went up by 50 per cent. The manufacturers had to raise the prices at least partially to stay in business.

He said the industry had also taken up measures like value engineering, curbing unproductive expenses and keeping the inventory levels to the minimum etc in a bid to rein in the cost, though the industry did not resort to any downsizing of the workforce to save cost.

The SIEMA President said that during last year, the agricultural pumpsets market witnessed a 30 per cent negative growth and the demand for pumps used for domestic purposes fell by 20 per cent. In States such as Tamil Nadu, Karnataka and Maharashtra, the market shrunk because of drought as farmers put off sinking of new borewells. In a few northern States such as Rajasthan, Punjab and Madhya Pradesh, there was an extended monsoon that also had a negative impact on the market demand.

As the Met department has predicted a normal monsoon, Mr Rajendran expected a revival in demand for agricultural pumpsets and expected the southern markets to drive the demand growth for farm pumpsets.

It may be around 40 per cent this year and after adjusting the previous year's negative demand of 30 per cent, the actual demand growth for farm pumpsets may be around 10 per cent.

He said it was also imperative that the lending institutions took the cue from SIDBI and reduced the interest rate on advances to the small and medium enterprises (SMEs) substantially so that the industry could take up modernisation works.

SIDBI has decided to slash the lending rate to SMEs to 9.5 per cent which is 2 per cent less than the banks' PLR. He said the industry found that the State industrial finance/promotion organisations like Sipcot, TIDCO and TIIC either did not have sufficient funds to lend to the industry or charged a far higher rate of interest making borrowing from them unviable for the industry.

Mr Rajendran said the pump industry expected that post-2005, there would be intense competition from countries like China, Taiwan and even the European Union and the industry would need to make a substantial investment annually in research and development, on measures to reduce cost and increase productivity etc and cost effective and timely financing would be key to the domestic pump industry remaining competitive.

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