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The government's push towards electric vehicles, with a target to eliminate petro and diesel cars by 2030, would have a serious impact on the country's forging industry, which relies heavily on auto-component manufacturing. This is because an electric car uses a very small quantity of components compared to a conventional-fuel vehicle, says an industry association.
"The introduction of EVs will have an adverse impact on Indian forging industry, as 60 per cent of the forging units are into manufacturing auto components," said S Muralishankar, President of Association of Indian Forging Industry (AIFI).
Internal Combustion Engines (ICEs) have around 2,000 moving parts, compared to only 20 in electric vehicles, which do not have complete engine and transmission parts and only consist of steering components, suspensions and axles.
"As a result, on an average 60-70 per cent of the demand for forged auto components will decline, resulting in job losses and unit shutdowns," he said.
Commenting on the industry scenario, he said that for the past one year, the demand for forgings has been on the rise both in domestic and overseas markets. The industry is facing challenges in terms of increasing steel pricing and technology upgradation. Goods and Services Tax (GST) implementation has also taken a toll on the industry.
As per a recent survey by the association, the 378 functional forging units across India had an estimated turnover of Rs 31,189 crore in in FY 2016-17, and were providing employment to approximately 100,000 people. Installed capacity rose from 3.76 million metric tonnes in FY 2014-15 to 3.85 million metric tonnes in 2015-16, with overall production of forgings rising from 2.25 million metric tonnes to 2.39 million metric tonnes.
The 75 units in the southern Region (Chennai: 29, Bengaluru: 16, Hyderabad: 10, Coimbatore: 9, Others: 11), account for an annual turnover of Rs 4,039 crore and a total installed capacity of 535,000 metric tonnes. The southern region accounts for 14 per cent of total installed capacity in India.
The association said that concerns over GST, including input tax credit and documentation, increase of working capital, lack of clarity in processing returns and no cost saving, had to be addressed.
The forging industry in India has been showing a growth trend the past three quarters, but the steel requirement is not being met by the steel industry, it said. Steel prices in the country also erode the competitiveness of Indian exporters in the global market. The industry also needs technology upgradation to compete with global players, it added.