Diesel engine pump set manufacturers and exporters in Punjab are now feeling the effects of the global melt down. Most of these units are in the SME segment.
In the October-November period, the industry witnessed 30 per cent fall in export business compared to the same period last year. Exporters fear exports may actually decline this fiscal year.
AK Kohli, senior vice-president, Punjab chamber of small exporters, said the first quarter of the this financial year (April-June) saw exporters suffer due to rising steel prices. Still, exporters had to fulfil their commitments and execute the export orders, even at loss. The second quarter was relatively stable for the markets, but the sudden crash in world markets has led to a decline in the prices of basic steel and other inputs by approximately 30 per cent.
“Despite decline in prices of steel, the industry was under pressure and during October – November 2008, the effect of slowdown started showing its worst results,” Kohli added.
Globally, buyers are not giving repeat orders and during November, only 10-20 per cent of pending orders could be revived and that too with great discounts. The drop in demand has been so drastic that not a single unit is able to run smoothly even for a single shift.
Currently, there are 12 export houses in Punjab and over 3,500-odd units manufacturing and supplying components of the diesel engines to the export houses.
The diesel engine sets , used mainly for irrigation, are widely exported to West Asia, Africa and other developing countries.
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The total export from this sector is over Rs 500 crore with states like Punjab, Uttar Pradesh, Gujrat, Maharashtra, Madhya Pradesh being the major centre for manufacturing. Punjab contributes around Rs 150 crore through established export houses. The major manufacturing centres in Punjab are Phagwara, Ludhiana, Bathinda and Amritsar.
There is also a feeling among industrialists that export orders were now not being received and buyers were reluctant to receive orders. This has led to a disturbance in the credit cycle of the business.
The industry provides large employment opportunities for unskilled labour, especially from the rural areas. Even a small unit manufacturing parts for diesel engine pump sets, provides employment to more than 30 workers. It is feared that more than 6,000 industrial workers are likely to become jobless from this sector, if the present scenario continues beyond 2008.
To provide relief to this sector, industrialists are demanding that the central government should provide some relief to industries like 100 per cent exemption on export Profits u/s 80 HHC, 100 per cent exemption from Service-Tax, TDS & other micro taxes to exporters exporting their full productions. Also, exporters are demand cheaper export finance from banks at 5 per cent both for pre & post shipments up to 360 days, increase in duty drawback incentives by further 10 per cent etc.
They also demanded that the state government should give 100 per cent VAT refund in time, 50 per cent concession in house max, minimum 8 hours uninterrupted electric supply to export and SME Units and exports must be a declared item under essential services Act.