Forging industry sees 20 percent cost rise on high power tariff: AIFI

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Mumbai | Updated: September 10, 2018 9:03:42 PM

The forging industry, which majorly supplies its products to auto parts makers, has seen a 20 per cent jump in costs owing to rising fuel and steel prices along with high power tariffs in Maharashtra, an industry association said.

As compared to usual trend of low production during April-May period, this year has witnessed a continued higher demand during the first quarter. (Representational photo)

The forging industry, which majorly supplies its products to auto parts makers, has seen a 20 per cent jump in costs owing to rising fuel and steel prices along with high power tariffs in Maharashtra, an industry association said.

However, despite this, the sector is expected to clock a 10 per cent growth in this fiscal year, according to Yash Munot, chairman western region, Association of Indian Forging Industry (AIFI).

As compared to usual trend of low production during April-May period, this year has witnessed a continued higher demand during the first quarter, he said.

“One of the main concerns in this region is the electricity tariffs which have gone up in Maharashtra since August and which are probably the highest in the country.

“Moreover the fuel and steel prices have also shot up significantly. All these factors combined have increased our costs by 20 per cent,” said Munot.

Industries such as forging and steel need a lot of power, he said, adding, “The increase in electricity charges is a pressing concern for all of us, especially when more than half of the forging capacity is catered through this region.”

The western region comprising Maharashtra and Gujarat account for 1.8 million tonne of the total 3.1 million tonne of the installed capacity, according to him.

While the big players have been able to offset some of the increased cost in electricity through higher usage of solar and wind power, the smaller companies have been hit harder, he said.

Munot said that AIFI has taken up the issue with the state government but is still to get a response.

Nevertheless, he said the industry has seen a good growth in the last six months, with demand coming from all the segments – heavy commercial vehicles, tractors and two and three-wheelers.

Attributing the growth to the surge in vehicle sales across all segment in June quarter, which is continuing this quarter as well so far, he said, “It has provided a strong impetus to the forging industry and as a result, the demand for forgings has been on the rise in the domestic market.

The export of forging has also witnessed an increase in demand from both Europe and North American markets, he said, adding backed by strong demand, the forging industry is likely witness a growth of more than 10 per cent in FY19.

Amid the government’s infrastructure push, many global original equipment manufacturers (OEMs) and tier-I players are setting up purchasing offices in India and looking at procuring high standard quality products, he said.

“This will open doors for many Indian manufacturers. Also, several auto OEMs are looking at India as a base for exports to the other Asian, African and even European markets which will push the growth for the auto component industry as well,” added Munot.

According to the latest SIAM data, the commercial vehicle segment grew by 55.67 per cent during the April to July period, over the year-ago period.

However, the passenger vehicles segment, which showed a slight decline last month due to Kerala floods and delayed festive season, rose by 9.32 per cent during the April to July period.

In the tractor segment, total sales for April-July were 3.07 lakh units, registering a 24.09 per cent year-on-year growth.

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