Foundry industry looks to boost exports

Import restrictions and high power costs are affecting the growth and competitiveness of the Indian foundry industry.

With demand high in both the global and domestic markets, the industry is now looking for government support in the form of concessions and rebates to meet higher targets set for the next few years.

V Mahadevan, president, the Institute of Indian Foundrymen (IIF), said "There is an urgent need for investments for scaling up operations, automation, quality levels and meeting environment norms to cash in on opportunities at the international level."

Several advanced countries, such as the US and Japan, are not keen on expanding their castings capacities due to high wage and manufacturing costs, coupled with difficulties in handling pensions. These countries are eyeing low-cost countries such as India as sourcing bases for their global requirements.

Original equipment manufacturers (OEM) abroad are also looking at capitalising on the advantages offered by India for sourcing whole products. "Export prospects are very encouraging for units having focussing on high-end castings," added Mahadevan.

An investment of Rs 125-150 crore would be needed to scale up a domestic foundry to global standards with a production level of 100 tonnes a day, he added. Only 20-25 units of the 4,000-odd foundries in the country have such capacities. About 80 per cent of the castings are produced by one-fifth of the industry as a huge number of units have small capacities.

The total production of castings is forecasted to go up to 10 million tonnes in the next two years from seven million tonnes. The industry expects an investment of $2 billion in the next three-four years to achieve such production levels. Last year, the size of the industry was estimated at about $8 billion (including exports of $1 billion).

The global production of castings is estimated at about 95 million tonnes. Even a shift of an additional million tonnes to India can result in 18 per cent growth, which would translate into job opportunities for 100,000 people in the economically and socially backward sections.

"The industry has asked for government support for its large investment needs as well quick clearances for starting new units. While it is already grappling with high power tariff and shortage of trained manpower, the customs duty on scrap imports and restrictions on import of used rail scrap make the Indian foundry industry less competitive compared with other low-cost countries," said Mahadevan.

The industry body is urging the government to remove customs duty and restrictions on imports as the industry depends heavily imported scraps. It also seeks some relief on the power front as countries like China compete better with low power costs.

It has also asked for the enlargement of the DEPB scheme's eligibility to the full value of the invoice, which will benefit small and medium companies.

According to IIF estimates, the Indian foundry industry employs about five lakh people directly and three times that number indirectly, mostly from the backward sections.

METAL BEAT

About 80 per cent of the castings are produced by 20 per cent of the industry as a huge number of units are small

Countries like the US, Japan, not keen on expanding their castings capacities, are eyeing low-cost countries like India as sourcing bases

An investment of Rs 150 crore is needed to scale up a domestic foundry to global standard with a production level of 100 tn/day

IIF estimates the Indian foundry industry employs about five lakh people directly from backward sections