The Association of Indian Forging Industry (AIFI) today asked the government to provide a level playing field so that the sector can match its Chinese rivals both in domestic and international markets as it looks to post up to 25 per cent growth in the next fiscal.
Stating that price of the domestic steel, which accounts for 70 per cent of the raw materials cost of the industry, is up to 12 per cent higher than international prices due to taxes, AIFI said the government should create an environment where the domestic players can be competitive.
"Steel that we buy here is 10-12 per cent higher than the international prices. Moreover, the Chinese enjoy export incentives from their government and makes it difficult for us to compete with them," AIFI Chairman of Finance and Administration Committee Asheet Pasricha told PTI.
There has to be an environment where the domestic steel prices are brought to the level of the Chinese price and also incentives are provided on exports, he added.
There has also been an increase in imports of parts from China by automobile makers in the domestic market, he added.
On the export front, he said about 20-25 per cent of the total turnover is accounted by overseas sales but "increased competition from Chinese manufacturers could impact exports of the industry."
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The Rs 13,200 crore forgings industry has witnessed about 70 per cent growth so far in this fiscal and the same is expected to continue in the last quarter, although it has been on low base of the previous fiscal.
In the ongoing fiscal, the industry is expected to reach a total production of 2.3 million tonnes, up from 1.8 million tonnes in 2009-10.
"Going forward, we expect that the industry should grow at about 20-25 per cent in the next fiscal but there are a lot of concerns ahead," he said.
High inflation, increase in petroleum prices and what the government will do with diesel prices, credit availability and liquidity are factors that will determine the growth of the sector, Pasricha said.
Asked if there could be fresh investments coming into the sector, he said at present the automotive forgings segment has only 60 per cent of capacity utilisation and further demand could still be met with existing capacities.
As far as the industrial applications, which account for about 30 per cent of the industry, is concerned the sector would see fresh capacities kicking in the fiscal 2012-13.
Currently the industry has a total production capacity of about three million tonnes annually.