The Covid-19-induced lockdown has added fresh troubles to the local foundry and SME engineering units in the Kolhapur region of Maharashtra.

From bad to worse

The local units make vital components for major automobile companies in India and abroad. The units had already been reeling under immense pressure due to the slowdown in the automobile market and introduction of BS-VI engine standards.

The business uncertainty created by the pandemic has led to a large number of existing orders getting stuck in the units and fresh orders not being accepted. Last August, the monsoon floods had also damaged a number of critical equipment in the foundries, leading to heavy financial losses.

Kolhapur is a major centre of the $20-billion Indian foundry industry. It is a highly labour-intensive industry which generates direct and indirect employment for 20 lakh persons in the country.

‘Power’ play

Chairman of Kolhapur Foundry and Engineering Cluster, Sachin Patil, told BusinessLine that given the financial and operational problems, a number of units soon face closure. State power utility MSEDCL has further compounded the problems by sending electricity bills — based on average power consumption — higher than actual usage, he claimed. Since Monday, the Maharashtra government has allowed partial opening of some of the units, but the conditions laid down for operating them are lengthy, complicated and difficult to comply, he added.

When the units are shut, electricity bills are high, and banks are not cooperating, Patil claimed. How is it possible for company management to pay wages to workers, he asked. In Kolhapur, the smallest foundry pays a monthly electricity bill of at least ₹25,000. The bills can be as high as ₹10 lakh per month for larger units. They also pay ₹12/kwh as power tariff, which is the highest for industrial consumers in the country, Patil claimed.

The Indian foundry industry manufacturers critical metal-cast components for applications in auto, tractor, railway, machine tools, pumps, defence and aerospace industries. On an average, they earn $3 billion as exports revenue. The foundries in Kolhapur make components for automobiles and tractors.

BS-VI transition

A leading industrialist from the region said the foundry industry has also been impacted by the decision of the Modi government to adopt BS-VI engines without introducing a well-structured scrapping policy for vehicles with BS-IV engines. It has directly contributed to the dip in vehicular sales, and its collateral damage is the slowdown in the foundry industry.

Prakash Rathod, Chairman and Managing Director, Caspro Group, said that a number of overseas orders, especially to countries such as Germany, are stuck due to the uncertainty about resumption of operations. Even if the units start operating immediately, it will take a couple days to stabilise production, he said.

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