The Hindu Business Line : Export-oriented foundry units facing closure

Kolkata, April 5 Expressing serious concern over the sharp escalation in prices of pig iron, particularly of the foundry grade, in recent months, the Engineering Export Promotion Council (EEPC) has cautioned that if corrective action is not taken by the Union Government immediately, there may be a “market failure”, prompting wholesale closure of export-oriented foundry units across the country.

It is felt that secondary steel producers, hardly affected by any escalation in input costs, have taken advantage of the scarcity situation in the country to book large profits (up by 315 per cent) in the last six months. The council hints at oligopolistic practices by a few players.

Briefing presspersons here, Mr Rakesh Shah, Chairman of EEPC, said pig iron prices had shot up by 40 per cent within a span of just 10 months, forcing most of the foundry units in West Bengal as well as in other parts of the country to stop export of castings products to US and other countries.

Call for intervention

The council, suspecting the hand of a powerful price cartel of steel and pig iron producers, has urged the Union Government to intervene immediately to stabilise prices of both pig iron and steel if the small foundry units have to be saved. Mr Shah said the government should urge steel producers to tone down the pig iron price hike by 25 per cent to ensure parity between Indian and Chinese prices.

After a cut in excise from 16 per cent to 14 per cent in the Budget, pig ion prices have actually shot up. “Any cut in excise will not help till steel producers reduce the base prices on which excise duty is charged.”

Mr Shah clarified that while pig iron prices have increased globally, the Indian prices were today way above the global prices, especially the Chinese domestic prices, “which are much below the Indian pig iron prices.

Giving a comparison, he said as on March 15, 2008, pig iron prices in India, inclusive of VAT and excise duty was $775 per tonne in contrast to the $571 per tonne in China (Hebei price, which is inclusive of 17 per cent VAT).

Pointing out that climbing pig iron prices have hit both the foundry and castings industry and the handtools sector, Mr R.P. Sehgal, Region Chairman of EEPC, said prices in Kolkata as of April 1, 2008 have shot up to Rs 33,300 per tonne from Rs 29,975 per tonne on March 15, 2008. In Delhi, prices rose by Rs 3,000 to touch Rs 34,000 per tonne within a period of just 15 days, he added.

Mr Sehgal said that unable to bear the sharp price increase in pig iron, small and medium foundry units in Howrah have informed the council of closure of operations from April 1.

Export-worthy castings production, he felt, may effectively come down to 1 lakh tonne from the 2.5 lakh tonnes till recently, effectively stubbing out as many as 20,000 jobs from the 50,000 employed by the export-centric foundries in Bengal.

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