“Extreme pressure on the price front is stifling research and development, apart from resulting in quality sometimes taking a back seat”

Amit Mitra

Mumbai, July 24 Faced with a sharp rise in prices of raw materials, especially aluminium and copper, the electrical cable manufacturers in the country, like their counterparts in other sectors, are struggling to stay afloat.

With the last six months recording a spurt in aluminium prices, many manufacturing units have shut down production, while some others are on the verge of closure, an official of the Indian Electrical Equipment Manufacturers Association (IEEMA) said.

“Almost all raw materials we use have registered a sharp surge in prices. Take aluminium prices, for instance. Aluminium, which has a weightage of 0.853 in WPI, was priced at about Rs 1.14 lakh a tonne on January 1, 2008. On July 16, it was Rs 1.6 lakh a tonne, an increase of almost 45 per cent in six months,” he said.

Raw material prices soar

In fact, industry sources say that during the last three years, prices of copper and steel, the other inputs for the cable industry, have grown by 100 per cent and 50 per cent respectively. The cable industry, they say, faces an inverted duty structure, with duty on finished products being more than that on raw materials. “Extreme pressure on the price front is stifling research and development, apart from resulting in quality sometimes taking a back seat,” the official admitted.

Domestic Market

The size of the Indian cable industry is estimated at Rs 17,000 crore. According to IEEMA data, in 2007-08, the industry produced about four lakh tonnes of conductors worth Rs 5,000 crore and Rs 12,000 crore worth of cables (excluding telecom and winding wires, but including part of building wires used for industrial purpose). About 20 per cent of the industry is in the unorganised sector, which is growing in the light of the high rates of excise duty (14.4 per cent) and uneven VAT across the States.

In physical terms, the production of power cables (PVC & XLPE) increased from 73,172 km in 2005-06 to 1.28 lakh km in 2007-08, while that of LT control cables increased from 38,372 km to 51,023 km during the same period.

“The manufacturing facilities in the country are in line with international standards. But with many international players coming to the country, we expect that this will further upgrade the standards,” the official said.

Construction Boom to benefit

The industry has been especially facing a strong demand growth from the building wiring cables segment, which comprises residential and commercial property, hotels, malls and offices. The residential segment contributes a major portion of the demand, followed by ships and offices. “The size of building wires and cables is estimated at Rs 5,000 crore. The demand will further go up due to new residential and commercial complexes and malls that are coming up. Apart from this, telecommunication segment indicates tremendous demand for optical fibre cables,” he pointed out.

(This article was published in the Business Line print edition dated July 25, 2008)
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