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Forging units in the northern region, hamstrung by subdued demand due to the slowdown in the automobile sector, have high hopes from the upcoming Union Budget. These small and medium-sized units supply steel and steel alloy components such as gear shafts, excel shafts, suspension components, steering components and engine components (like crank shafts and connecting rods) for passenger and commercial vehicles.
These companies, which are largely concentrated in Punjab, Haryana, Himachal Pradesh and Delhi, constitute 36 per cent of the total number of forging units across India in the organised sector.
Read our full coverage on Union Budget Apart from lacklustre growth in the automobile sector over the past few years, cheap imports from China have also undermined the growth prospects of the forging industry in India.
"There are about 160 forging units in the north, mainly catering to tractor and passenger carmakers. We have the potential to tap the export market as well but our distance from the sea renders us uncompetitive," said Alok Sharma, chairman (Northern Region) of the Association of Indian Forging Industry (AIFI). The units in the north are at a distance of 1,500 to 1,700 km from the sea ports, which increases the cost of exports by Rs 4,000-5,000 per tonne, he added.
Given the euphoria over the industry-friendly attitude of the National Democratic Alliance government at the Centre, forging units in the north envisage a duty drawback over and above the two per cent available to exporters.
"We have submitted to the government that it should introduce slabs of export subsidy at two per cent, four per cent and six per cent, according to distance, so that units operating from land-locked regions may also test the waters in the export market," Sharma said.
Indian steel forging players mainly cater to the markets of the developed world in Europe, the US and South America.
The total turnover of the Indian steel forging units is approximately Rs 20,000 crore, and exports account for 25-30 per cent of revenues. Indian players believe they have a potential to earn more foreign exchange if the Central government extends more support.
"Indian forging units have excess capacities and can expand manufacturing if a congenial business environment is provided. In order to implement the 'Make in India' slogan, the manufacturing sector will have to be strengthened," said Ranbir Singh, president and chief operating officer of GNA Axels and vice-president of the Association of Indian Forging Industry.
He added that out of an annual capacity of 3.8 million tonnes, the steel forging industry has been utilising only about 2.3 million tonnes.
SME officials say that technological upgradation is imperative to beat competition from cheaper imports in the domestic market and create a niche international market. Hand-holding in the form of an interest subvention or a technology upgradation fund can help the industry achieve a higher growth rate, added Sharma. A relief in the rate of interest is also one of the key demands of this industry.