Steel prices worry industry in Karnataka

The top five sectors in Karnataka in terms of their contribution to the state gross domestic product (SGDP) are automotive and auto components, information technology, electronic, engineering and steel industry have their issues and concerns.

The survey by Confederation of Industry (CII) (southern region) found that Karnataka with an investment of Rs 2,924 crore in automobile sector saw a growth of 17 per cent in 2004-05. Being a hub for some of the leading automobile companies, it hopes to see a growth of 22 per cent in 2005-06.

The auto components industry mainly derived its growth from exports as well as a robust growth in all segments in the domestic market. The operating profit of the industry marginally declined on account of a rise in input costs during the first three quarters of 2004-05.

This year the major concern of the industry is the rising prices of steel and aluminium. These could push up the input costs, thereby hitting the bottomline.

The electronic industry in the state, with around 300 global players, has an average annual turnover of $1 billion.

The electronic industry posted only volume growth in 2004-05 but hopes to post value and volume growth in the coming year owing to 10 per cent rise in prices in 2005-06. The major bottlenecks the industry faces are poor connectivity to overseas markets, inadequate ports and unreliable power supply.

Karnataka's IT industry showed a steady and high growth rate compared to other states. The total investment made during the first half of 2004-05 was 1,120 crore with nearly 92 entrants. Owing to higher billing, the industry registered a revenue growth of 25 per cent in 2004-05.

An impressive order book position has encouraged the industry to provide earnings guidance for 2005-06. But the industry has its own concerns like the high attrition rates and the overburdened infrastructure.

The engineering industry has posted higher sales and profit margins due to a rise in operational efficiency. With the infrastructure industry booming the construction industry registered a year-on-year growth of 20 per cent and hopes to carry the growth momentum in 2005-06. But the major hindrances in the growth are lack of infrastructure and dumping by Chinese producers.

The steel industry has performed well both in terms of volume as well as value in 2004-05. Again, with an increase of investments in the infrastructure, it hopes to better its performance.

The industry has hinted at the possibility of raising prices in 2005-06 and has warned that volatile iron ore and coal prices and the shortage of steel scrap could disruot production.

Steely worries

• This year the major concern of the industry is the rising prices of steel and aluminium
• The operating profit of the industry marginally declined on account of a rise in input costs during the first three quarters of 2004-05
• The major hindrances in the growth of the engineering sector are the lack of infrastructure and dumping by the Chinese