1. For a strong Make-in-India foundation

For a strong Make-in-India foundation

The Indian foundry industry, while becoming a significant player in the world castings market, can help the country achieve Make-in-India goals

By: | Published: November 10, 2015 12:34 AM

Industry experts accept that Make-in-India is a welcome initiative to provide a thrust to the manufacturing sector. They, however, also believe that this campaign—in order to succeed—needs to be well-strategised. For example, Vikas Garg, the president of the Institute of Indian Foundrymen (IIF), questions how can Make-in-India succeed if the foundry industry—the mother industry for all engineering—remains ailing?

Excluding a few large and medium foundries which are modern and competitive, most small and micro foundries in India—constituting 96.6% of the total number of foundries—suffer from technological obsolescence, production inefficiencies and weak finances. They manufacture predominantly low-value, low-quality products for a saturated market. Foundries supply castings to almost all engineering industries; for example, the infrastructure industry, the government’s thrust area, requires ingots and billets.

Although India ranks third in the world as the producer of castings after China and the US, the domestic industry is unable to meet the increasing demand from the user industries for high-quality and high-value foundry products. IIF forecasts that the demand-supply gap is likely to grow to 11 million tonnes by 2016, with the automobile industry being the most adversely affected since it procures as much as 32% of the total castings from the foundry industry. Imports of high-quality castings would be inevitable, resulting in import-dependency and higher input costs for the vital engineering industries.

The pressure to cut prices of their products in a fiercely competitive market causes a continuous squeeze especially on profit margins of micro and small foundries. This pressure may help weed out the inefficient ones but even the relatively more efficient ones would require a reasonable profit margin on a sustained basis to survive.

Micro and small units use energy-inefficient technologies, particularly those with coke-based single cupolas and furnace-oil-based rotary furnaces. The quality of raw materials supplied by traditional traders is rarely tested and quantities of inputs is not perfectly measured. Although inadequate availability of good quality silica sand is a major constraint, sand reclamation is not seen as a common practice among Indian MSMEs.

Foundry industry has been placed in the “red category” because of certain pollution-generating operations such as sand preparation, emissions from cupola furnaces, production of waste used and sand, slag and sludge. However, pollution levels differ from unit to unit. Placing the entire foundry industry in the red category is patently flawed.
There is a need to streamline the plethora of schemes of different government departments meant for MSME development. The recent initiative by DIPP to set up a Foundry Development Council with representatives of the foundry industry and related government departments is a positive step to foster government-industry consultations and inter-ministerial coordination regarding foundry-related issues. On similar lines, Foundry Cluster Councils should also be set up in major foundry clusters for better coordination at the field level.

In addition, DIPP should launch a National Foundry Development Programme as a flagship for comprehensive and integrated development of this crucial industry.

* A special scheme should be taken up to provide infrastructure support to existing natural foundry clusters. Besides providing basic infrastructure like internal roads, reliable water and electricity supplies, specialised facilities should be set up in common facility centres such as testing equipment, design centres and common shared services. In many states, foundry clusters find themselves surrounded by human settlements due to rapid urbanisation.

Relocating them to existing industrial estates is difficult in view of their polluting activities. It would, therefore, be necessary to set up separate “Green Foundry Parks”. The environment ministry would need to formulate and notify Green Infrastructure Standards for such parks.
* The government should encourage foundry units to adopt green technologies such as use of renewable energy, construction of green factory buildings, better house-keeping, commercial use of waste foundry sand and slag, installation of sand reclamation units and casting simulation software packages for use on time-share basis.
* Pollution Control Board officials’ rigid regulatory approach of “comply or close down” should give way to a more development-oriented regulatory approach of “comply and benefit”. Foundry industry should be encouraged to develop voluntary benchmarks on sustainability parameters under which there could be five categories in terms of pollution levels, namely red, orange, amber, yellow and green. Government and financial institutions should provide technical and financial support to the units to move up in a phased, time-bound manner from one category to the other.
* Since modernisation is capital-intensive, DIPP should set up a special Foundry Technology Upgrade Fund (FTUF) to provide credit-linked financial assistance for “demand-driven technology upgrade”. This implies giving priority to those foundries which can, in a short time, upgrade their technologies and meet the demands of the user industries. In the case of micro foundries, however, the focus would have to be on low cost, incremental modernisation.
* Sham Arjunwadkar, the director of the Pune-based National Centre for Technical Services, feels that there is a need for industry associations, research and training institutes to collaborate to provide customised, innovative solutions for identified foundry clusters. Similarly, Anil Agashe, foundry expert at NCTS, laments that there has been practically no investment in R&D for the sector for the last four decades. The government should extend grants to well-reputed public and private research institutes for industry-related and industry-driven projects to develop green technologies that are innovative, appropriate and cost-effective. MM Reddy, a foundry owner in Hyderabad, feels that foundry industry requires skilled labour and vocational training institutes should introduce specialised courses to meet the needs.
* MSME foundries have low risk-taking capabilities. They will invest in product diversification only if there is an assurance from potential clients of support through the entire product development cycle and of buy-back arrangements once required specifications are met. In fact, a strategy of “adoption” of select foundry clusters by specific user industries and establishment of supply chain linkages would yield dividends.

The increasing domestic demand for high-quality, high-value castings and the availability of world-class infrastructure in the proposed Green Foundry Parks may attract domestic investment and FDI to this sector. There is a great opportunity for the Indian foundry industry to help the country achieve the goals of Make-in-India, while becoming a significant player in the world castings market.

The author, a retired civil servant, is senior adviser, Foundation for MSME Clusters, New Delhi

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