The ongoing recession in foreign market has grounded Punjab’s handtool industry which accounts for 80-85 per cent of the total handtool exports from India. Exporters are of the view that this year the export will decline significantly as buyers are scarce.
According to estimates, total export from India might witness a negative growth of 13 per cent this fiscal year and touch Rs 675 crore as compared to Rs 776.97 crore during the corresponding period last year.
The handtool industry of Punjab employs nearly 60, 000 people and consists of about 400 units. Majority of the units are in the SME sector. The major export markets are USA and EU. These account for 50 per cent of the export orders from Punjab. The exporters supply handtool to major retail chains like Wal-Mart, B & Q, Home Depot etc.
The handtool industry in Punjab has witnessed an average growth of 20 per cent over the last few years, but exports are on a downturn since last two years.
The handtool exports suffered a setback in 2006-07 and in 2007-08. In 2006-07, the handtool export from the country was Rs 828 crore, as compared to Rs 909.32 crore during the corresponding period last year.
In 2005-06, the handtool exports registered 16.80 per cent growth over the previous fiscal year, they declined to 8.94 per cent in 2006-07. Further, in 2007-08, exports fell further to Rs 776.97 crore and it expected that during the fiscal the export will fall further.
The decline in exports has affected mainly Industry situated in Punjab (especially Jalandhar and Ludhiana as these are two main centres), as the state alone contributes 80-85 per cent of the total exports from the country. Earlier, the continuous increase in price of steel and other raw materials affected the industry. The economic meltdown has added to the industry’s woes.
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Ashwani Kumar, director, Victor Tools Ltd, said: “Recession has not affected the auto industry but the handtool manufacturers. In absence of orders the industry is resorting to job cuts.”
In Punjab, over the last year, around 50 units have closed operation or have diversified. It is expected that if the trend continues more units will have to close down. The capacity utilisation for the industry has also decreased. From running on a two-shift per day basis, the industry is now working in single-shifts. This change has drastically reduced the number of workers and about 8,000 workers has been laid off by the industry.
| OVERSEAS MARKET SHRINKS | ||
| Year | Export (in Rs crore) | %Growth |
| 2008-09(estimated) | 675.00 | (-)13.12 |
| 2007-08 | 776.97 | (-)6.16 |
| 2006-07 | 828.00 | (-)8.94 |
| 2005-06 | 909.32 | 16.80 |
| 2004-05 | 778.52 | 23.76 |
| 2003-04 | 629.06 | NA |
Sharad Aggarwal, convener handtool panel, Engineering Export Promotion Council, said: “The situation is very alarming. According to our estimates, already handtool export is down 20 per cent in terms of value and 35 per cent in terms of volume in the third quarter of the current fiscal year as compared to corresponding period last year. It is also expected that in the forth quarter of the current fiscal year, the situation would be more alarming and export might be down by 50 per cent over previous year.”
He added no orders were flowing from customers (Original Equipment Manufacturers/ Tier I manufacturers) due to an auto sector slowdown globally and in India and also the existing buyers are not repeating orders.
He added: “Although the steel prices have come down, they are still higher as compared to prices in the international market. So, the government should lower the prices of steel further. The government should also reduce interest rates further to boost local and export industry.”
He also added the government should increase DEPB rates by 3 per cent to make Indian products more competitive in the global market.
Industrialist demanded the centre government should direct Banks to increase the limit by 30 per cent as compared to last year without any collateral.
“The government should include foreign tier/ sales tour undertaken by the industrialist at its own expense in order to attract the buyers should be included under MDA scheme (Market Development Assistance),” said an industrialist.