The Hindu Business Line : Dip in demand, jump in input costs hurt pump industry

THE pump industry in Coimbatore has seen a sharp decline in demand for both agricultural and domestic pump sets in the second quarter of the current fiscal even as the increase in input costs eroded the industry's profitability by 3 - 4 per cent.

While the industry has resorted to curtailing production by 25 to 30 per cent to avoid building up a huge inventory, it has not taken recourse to any drastic measures like laying off the workforce to cope with the decline in sales.

Prominent players in the industry are also looking at options such as standardisation of design and pooling raw material purchase in an effort to achieve cost control and improve quality.

Speaking to presspersons here, Mr C.R. Swaminathan, President, Southern India Engineering Manufacturers' Association (Siema), Coimbatore, and Mr G. Rajendran, President, Coimbatore Industrial Infrastructure Association (Coindia), said the first quarter of the current fiscal was reasonably good for the Coimbatore pump industry. But in the second quarter, the industry had recorded a 25-30 per cent negative growth in the agricultural pump sets segment and 10 per cent negative growth indomestic pump sets. The overall performance in the first half of the current fiscal was 5 to 10 per cent negative growth in the case of domestic pumps and 20-25 per cent negative growth in agriculture pumps.

They said the industry was dependent on the monsoon, new power connection to farm pump sets and lending by the financial institutions for replacement of old agricultural pump sets. The rainfall has been generally good in most parts of the country with some of the States experiencing floods. The elections being held in Bihar also raised questions as to how the administration there would respond to the demand for releasing new farm power connections.

Mr Rajendran said the pump manufacturers in Coimbatore have seen an overall reduction of Rs 150 crore to Rs 200 crore in sales turnover in the first half of the current year. About 70 per cent of the decline is attributed to drop in sale of agricultural pump sets.

Mr Swaminathan said the sale of domestic pumps should not have taken a hit since the real estate sector was witnessing a boom across the country. But, he said, this could be due local brands capturing the market of organised players in the industry hailing from Coimbatore. He expected the demand for agricultural pump sets to pick up after Diwali and felt that the markets for agricultural pump sets would be good during November-June 2006 and for domestic pumps between January and June 2006.

He said the industry's profit margin has also taken a hit due to intense competition, fall in demand, rise in raw material price and inroads made by the kit pumps from the unorganised sector. The industry has cut back production by 20-30 per cent in the second quarter compared to the first quarter this year in order to avoid a huge inventory pile-up.

Mr Rajendran said the Coimbatore pump industry produced annually 20 lakh pump sets for both domestic and agricultural use. There was also a shift in the purchase preference of customers to submersible pumps due to digging of borewells rather than open wells.

He said the demand for pump sets in the country was three million a year, out of which agricultural pump sets constituted nearly 1.2 million units. The authorised new power connections were just three lakh but the banks did not lend for replacement of existing pump sets.

Mr Swaminathan said if the decline in growth continued, the Coimbatore `pump and motor manufacturers should diversify' into other areas like auto components. Coimbatore has around 500 pump manufacturers. There should be an attempt to standardise product design. There should be a collective approach to produce components to bring down cost and ensure uniformity in quality.

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