In an exclusive interaction with SupportBiz, A. Sivashanmugakumar, President of COSMAFAN, said, “We request the government to initiate an immediate intervention into this matter to launch a raw material bank for foundries in this region. Raw material price fluctuation takes a heavy toll on the industry here. Only a raw material bank can bring in some sort of a stability in prices.” The cost of critical raw materials such as pig iron, CRC scrap, CI borings and heavy melting scrap has been steadily increasing over the years.
The association had approached the central and state governments with the same request and is hopeful that it will become a reality shortly. It's learned that the state government is working with the Small Industries Development Corporation (SIDCO) while the central government has already begun the preparatory work for the project in collaboration with the ministry of Micro, Small and Medium Enterprises (MSME). Various government agencies involved with the proposed project are reportedly in talks with raw material suppliers across the country to ensure smooth supply.
Coimbatore is home to almost 600 foundries supplying castings to hundreds of engineering, pump set and component making units. Off the 600, 400 are tiny and small, 150 are medium and 50 are large in size and on an average, a unit produces around 50 tonnes per month. While a unit typically employs around 10-50 people, the overall employment of the industry is estimated to be around 2 lakh.
Being the parent industry for all engineering industries, the scope for the foundry industry is enormous. However, the fact that nearly 80-90 percent of the casting value depends on raw material prices indicates how crucial the impact of price fluctuation on the industry is. “Even a small change in the raw material or dollar price will affect our profit margins very badly. Since most of our businesses are in the nature of long-term contracts, we cannot impose a higher price on our customers to compensate for the increase in raw material cost,” he said.
COSMAFAN has also been demanding the government to look into the financial aspects of the foundry industry. While the usual seven-year repayment period for industrial loans is calculated on the basis of a 20 percent profit margin, the association has been fighting with banks to raise the repayment period to 10-15 years as the profit margin of this industry cannot be calculated to be more than 10 percent.