Just as the Indian pump industry began showing signs of growth at a healthy pace, the sudden rise in raw material prices has clouded its growth prospects.
Industry sources said raw material prices had started to move north since October last and the rise has been unabated till date. Prices of castings, steel, noryl (a lightweight engineering plastic) and copper have risen by 10 to 30 per cent and “we do not foresee any correction in the near term,” an industry source told BusinessLine .
KK Rajan, President, Southern India Engineering Manufacturers' Association (SIEMA), said the situation was grave, with many small players cutting their production by half and retaining just one or two workers to take care of operations.
Industry sources fear that the situation could lead to social unrest, as nearly 40,000 workers are engaged directly and another 2 lakh workers are indirectly employed in the sector.
“Many workers are already out of job and the situation is taking a turn for the worse as most units are in a cash crunch situation,” he said. The association has appealed to the Centre to allow import of metals and minerals to meet the shortage.
“Electric steel is used in manufacture of pump and there are very few companies that supply this steel. Some of them have shut operations in the last few months. This has resulted in supply shortfall and a hike of 30-40 per cent in costs,” said KV Karthik, Vice-President, SIEMA. The industry's requirement is estimated at 60000 tonnes of electric steel in Coimbatore.
The industry faced a setback after the GST implementation. “The government had promised that the input costs would go down after GST, but that has not happened. We want the government to intervene and fix the raw material price,” an MSME pump manufacturer said.
“Our vendors insist on instant payment through bank transfers while we are forced to sell our pumps on 60-day credit. This has led to cash crunch and banks are not extending working capital support. It is hard to remain in business,” he added.
SIEMA sources say the situation will compel pump manufacturers to revise prices upwards by 5 to 7 per cent.