Auto parts body urges Centre to check steel prices

The Automotive Component Manufacturers Association (ACMA) has urged the Central government to check rising steel prices.

"Rising steel prices have affected the Indian auto-component industry on the domestic front as well as exports. In the last one year steel manufacturers have increased prices by more than seven times," ACMA president K V Shetty said.

Referring to the problems faced by small scale sector units, Shetty said there was an urgent need for a reduction in import duty on steel and other raw materials to 10 per cent.

He also stressed on the idea of bringing in price stability and discipline among domestic steel producers.

The profit margins in the domestic market for manufacturers have begun to erode under the pressure of the rising prices.

The cost of iron ore, nickel and chromium have increased by 30 per cent or more in the last one year, while the price of various grades of steel have gone up by 50-70 per cent. It has been noted that there is an abnormal increase in the prices of finished steel.

"The growth in volume has compensated for the rise in steel prices and original equipment manufacturers have also been understanding to a certain extent," he said.

Owing to the steep increase in the prices of raw materials, steel manufacturers are reluctant to enter into long-term contracts, which in turn affect the growth of the automobile market.

It also weakens the competitive strength of the Indian component industry, as raw material duties in other countries are comparatively lesser than India.

Shetty said, "India's positions as a low-cost manufacturing base for global outsouring will be greatly handicapped due to frequent and steep raw material price hikes, like the one now being faced by the industry."

There is every likelihood of India losing its competitive edge to countries such as Thailand and China."

This would indeed be a big blow to India's prospects of emerging as a global hub for manufacture of auto components.

Shetty added that raw material costs in the auto component industry constituted close to 65 per cent of the cost of the product.

"Import tariffs need to be brought down as the impact of rising steel costs and indirect taxes could make the industry unviable," he said.