Engineering sector to witness more layoffs

Written by Sanjay Jog | Mumbai | Updated: Dec 29 2008, 05:56am hrs
The engineering industry in India will witness more layoffs, shakeouts in the months to come. According to the latest report on the impact of current slowdown prepared by the Engineering Export promotion Council (EEPC), engineering companies have so far reduced their work force by an average of 35% with upper end being 50% for some companies in the SME sector and 20% at the lower end by some.

Major cut backs are in respect of casual or indirect labour, a few companies had already cut permanent staff also. The situation will further aggravate after April when the gestation period with respect to the present work orders are completed. The auto and auto related component industry would witness a considerable shake out affecting the auto and component industry.

According to EEPC, engineering sector in India accounts for 4 million direct and indirect employment. In particularly, SME sector plays a critical role in providing jobs. In the SME sector, engineering industry accounts for 24.8% of the total employment making it the largest employment segment. The cotton textile comes next with 17% of total SME employment, while non-metalic mineral products account for 14.1%. EEPC regional director Rajat Srivastava told FE, It is necessary to provide a friendly environment to the Indian enegineering sector and it essentially implies infrastructural support, change in the mindset of bureaucracy and the implementation of measures already announced by the government.

Srivastava said EEPCs special task force has made a slew of suggestions which include a provision of Rs 350 crore to enhance DEPB rates by 2% across the board, replacement of service tax refund system by the service tax exemption system for the 19 items on which refund is allowed.

Moreover, export obligation under all export promotion scheme be extended by two years especially for large value licences in view of the present situation.

Moreover, RBI should direct banks not to put too much stress on collateralised banking in the present conditions. RBI should also ask banks to rework bank charges with respect to opening of letter of credits, commitment charges as these charges increase the cost of operations for companies.

Engineering should be given the benefit of interest subvention of BPLR minus 6.5% as has been given to certain sectors such as leather along with Technology Upgradation Scheme for upgradation and protect employment losses.