Financial Daily from THE HINDU group of publications
Sunday, Jun 06, 2004

News
Features
Stocks
Cross Currency
Shipping
Archives
Google

Group Sites

Industry & Economy - Engineering


Foundry, pump units seek rollback of raw material prices

R.Y. Narayanan

Coimbatore , June 5

EVEN as the Indian Steel Alliance (ISA), the association of five hot-rolled steel coil producers, has asked the Centre to keep away from regulating steel prices, the Southern India Engineering Manufacturers' Association (SIEMA), an umbrella organisation representing a large number of foundry and motor pump units in this region, has sought the intervention of the Centre to roll back the prices of crucial raw materials to the January 2004 levels.

It has also cautioned the Government that if the prices of raw materials continue to rise, it would lead to the organised manufacturers losing out to the unorganised players, which would have major revenue implications for the Government.

Mr G. Rajendran, President, SIEMA, told Business Line that the basic price of electrical grade cold rolled non-oriented (CRNO) sheet has gone up from Rs 33,000 a tonne in January 2004 to Rs 38,000 now. This product was the monopoly of two players — the public sector Steel Authority of India Ltd (SAIL) and a private manufacturer. There has been a continuous increase in the prices of this raw material for more than a year.

He said the pump manufacturers were already reeling under the impact of a 30 per cent negative growth in demand in the agricultural sector and 20 per cent fall in demand in the domestic sector. The unorganised sector enjoyed a near 30 per cent price difference compared to the organised players since the latter were saddled with 8-10 per cent sales tax levy, 8 per cent excise duty and overhead expenses of about 10 per cent.

The share of the unorganised sector in the pump market was in the range of 40-50 per cent depending on specific segments. In some States like Andhra Pradesh, unorganised sector enjoyed more than 70 per cent market share, despite the fact that their pumps were energy-inefficient.

The SIEMA President feared that a continued uptrend in the prices of CRNO sheets would drive some of the manufacturers to opt for lower quality electrical grade sheets that would push up the energy consumption of the pumps.

The organised pump manufacturers were facing resistance to price increase and if they scaled down production in view of persistent increase in raw material prices, the Government also may face loss in revenue.

Joining issue with the ISA, which has made an appeal to the Union Government not to make any market intervention and allow market forces to prevail, Mr Rajendran said, "We want Government intervention".

He pointed out that since there were only a handful of manufacturers in the steel industry involved in the production of raw materials required by the engineering industry, any decision to hike prices by SAIL was picked up by others. But the user industries did not enjoy the privilege of increasing the product cost to match the increase in raw material prices.

He said though the price of pig iron has softened now, it was still higher at Rs 22,500 a tonne now compared to Rs 18,000 (landing cost) in January.

More Stories on : Engineering | Steel

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page



Stories in this Section
Unions demand 12 pc interest on PF savings


AP Budget to be presented on June 23 — Appropriation Bill passed
Economists want step-up in farm investment
Foundry, pump units seek rollback of raw material prices
SIAM wants excise duty to be cut to 16%
Commerce Ministry handling Lankan trade pact issues
Tobacco industry plea for exemption from VAT regime
ICFAI sets up business school in Kochi
CII team visiting Singapore, Malaysia
ISRO bags Italian launch contract
EPCG norms on second-hand imports now a bone of contention
Mercosur an attractive destination for Indian exporters: Study
Special package for SEZ, EOUs on the cards



The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line