Surge in raw material price, poor digitisation impacts SMEs in Foundry Industry

The Foundry industry has sought Rs. 500 crore in government assitance for capital up-gradation costs, as the machines in use are absolete.

If the impact of Covid-19 was not enough, SME’s in the Foundry Industry are facing troubles due to surge in raw material prices and a lack of technological advancement.

The $16.6 billion foundry industry in India, also known as the “Mother Industry” for all engineering firms is second only to China in terms of capacity with a production of 10 million tonnes per annum, said Devendra Jain, President of the Institute of Indian Foundrymen (IIF), in a media call on Friday. Automobile companies’ purchase account for 70% of the industry, with the remaining 30% coming from other sectors such as railways, engineering, and wind turbines, Jain added.

Devendra Jain, President of the Institute of Indian Foundrymen (IIF), and Subodh Panchal, Chairman, Organising Committee of the 70th Indian Foundry Congress held a curtain raiser press conference for the three day mega event IFEX2022, to be held in Gandhinagar, Gujarat to discuss the issues and challenges facing the Foundry industry ahead of the 70th Indian Foundry Congress.

The current conflict between Russia and Ukraine has led to a surge in raw material prices by more than 50% compared to the earlier three-to-five percent surge.

Jain emphasised that as Chinese supplies are dwindling and ‘Atmanirbhar Bharat’ is gaining more traction, Indian foundry businesses have opportunities to explore domestic solutions. Russia and Ukraine exported a large amount of Pig Iron to Europe. However, because of economic sanctions, Europe is turning its attention to India, leading to scarcity in India as well.

Over the last nine months and during March 2022, a significant hike was seen in the cost of Pig Iron.

They emphaised that companies are having difficulty obtaining quotes for raw materials since the cost of raw materials is changing by the day. Even 20-30-year-old suppliers are unwilling to submit a price validity for more than two days because they are unsure of rate changes.

The Foundry industry has sought Rs. 500 crores in government assistance for capital up-gradation costs, as the machines now in use are obsolete, Jain and Panchal added. Further the industry is seeking assistance from the Government in the form of interest rate reductions from banks and financial organisations to help them tide through the difficult times. The funds will be used to modernise and expand.

The industry has further requested auto manufacturers to implement a monthly correction system instead of the earlier quarterly system because of the daily fluctuation in raw material prices, as well as assist them in compensating for additives (Ferro Alloys, Chemicals, Coatings and other auxillaries materials) components for which they were not previously compensated.

The industry being labour intensive, employs 5 lakh direct workers and 15 lakh indirect workers from lower socioeconomic groups. The business is expected to double in size in the next 2-3 years, with investments totalling roughly Rs. 5,000 million, Jain added.

Panchal stated that even though demand appears to be increasing, they cannot pre-pandemic demand because 50 percent of production facilities are down in Kolhapur, Belgaum, and Rajkot and are operating only three days a week. These three Indian cities account for most Foundry work.

According to Jain, the proposed three-day exhibition beginning on Sunday 17 April will allow raw material and equipment providers to network with industry experts and businesses to discuss and embrace cutting-edge technologies and is organised by the Institute of Indian Foundrymen, Western Region, the Indian Foundry Congress, IFEX, and Cast India Expo.