A ban on import of CNG cylinders in Pakistan combined with the economic sanctions on Iran is taking a toll on the Indian CNG industry with exports from five manufacturers declining sharply from R84.15 crore in 2010-11 to less than R40 crore in 2012-13.
India has six CNG manufacturing units of which five are present in the Kandla SEZ and almost 90% of Indian CNG cylinders are exported to Pakistan and Iran, which has virtually stopped now.
?Unfavourable external factors, which are beyond the industry’s control, have resulted in a decline in the exports of CNG cylinders that are mostly used in cars,? an official from Lizer Cylinders said.
The total investment of CNG cylinder manufacturing units in the Kandla SEZ is close to R400 crore, with the highest by Everest Kanto at R150 crore. In fact, the total number of people employed in the five units has seen a sharp decline from 1,055 in 2010-11 to 632 now due to subdued business.
The drop assumes importance as Iran’s auto industry is its second-largest after petrochemicals and depends on its vast overseas procurement network of global car and auto components manufacturers. Severe banking sanctions imposed by the US and European Union resulted in global auto components manufactures to withdraw their cooperation for supplying auto parts to Iran.
?This non-availability of components has affected the Iranian auto industry, which inturn led to a decline in vehicle production and sale. Due to the havoc in the automative production in Iran, supplies of CNG cylinders from India to Iran became close to zero,? the company official added.
This crisis had forced production units to work at 30% capacity leading to reduction of workforce and rising unemployment.
Recently, a group of cylinder makers requested the commerce ministry to reduce tax on imports of raw material. They also requested the ministry to extend the timeframe from five to 10 years for units located in special economic zones to earn net foreign exchange. However, a commerce ministry official said that the rupee payment mechanism with Iran is fully operational and CNG firms should make use of that.
