Forging industry singed by lower supply of pricey steel

Our Bureau Chennai | Updated on January 09, 2018

The lack of adequate supply of steel and its high price pose a big challenge to the domestic forging industry amid bright growth prospects in the near-term, according to the Association of Indian Forging Industry (AIFI).

“For us, to capitalise on the growth coming from the auto sector, the big problem is steel – its availability and price. The supply of steel within the country is less than that of demand. A lot of steel mills have closed their operations due to high debts and other things,” said S Muralishankar, President, AIFI.

Also, for several exporters, Indian steel prices are a deterrent for being competitive in the global market. “Indian steel price movements are totally different from the global markets,” he said.

Compared to European, Japanese and American counterparts and companies from China, Korea and Taiwan, the technology and automation levels are much lower, barring a few big forging companies.

Most of the forging companies are in the MSME segment and need to upgrade their technologies. For this, the industry needs huge government support in terms of further interest subvention and technology upgradation fund.

“On the power front, the situation has improved across the country. But the quality of power is still a concern,” said Muralishankar.

GST issues

On GST, the forging industry said it was facing issues pertaining to input tax credit and documentation, increase of working capital and lack of clarity in processing returns, among others. “If the GST implementation issues are not handled well, this new tax reform could have serious repercussions in the long-run,” said AIFI.

Meanwhile, the domestic forging industry, which supplies 70-75 per cent of its production to the auto sector, expects an improved demand in the coming quarters due to good monsoon season and surge in auto sales, especially commercial vehicles and tractors.

The estimated revenue of the 378 functional forging units across India in 2016-17 was ₹31,189 crore – they provide employment to about one lakh people across the country.

The installed capacity increased to 38.5-lakh tonnes in 2016-17 from 37.6-lakh tonnes in 2014-15, with the overall production of forgings increasing to 23.9-lakh tonnes from 22.5-lakh tonnes.

Published on November 14, 2017

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