Auto part makers seek Rs 7,500 crore from FinMin

Indian auto component manufacturers, struggling due to mounting metal prices, have asked for a Rs 7,500-crore Technology Development and Upgradation Fund from the finance ministry, ahead of the Budget.

“Metal prices have gone haywire over the past year, leading to depleting bottom lines due to rising input costs, despite the growing top lines. The fund will aid innovations, helping us to become a $110-billion industry by 2020,” said Vinnie Mehta, executive director, Auto Component Manufacturers’ Association.

The fund, according to Mehta, would serve the dual purpose of encouraging innovation within the sector, leading to the development of new manufacturing technologies and promoting additional investment. It would be allocated on the basis of proposals for modernisation in the manufacturing process and would work on a 50:50 ratio basis. The beneficiary would be required to put forward the same amount as has been allocated by the fund to the scheme.

At present, the auto sector accounts for about 60 per cent of India’s current machine tool demand.

According to ACMA estimates, the country’s auto market is set to touch 2.7 million cars, 0.5 million commercial vehicles (CVs) and 12.5 million two-wheelers this financial year.

These numbers are set for an exponential growth over the next few years. Estimates forecast that by 2020, India would have at least 10 million cars, 30 million two-wheelers and 2.2 million CVs. Component manufacturing units in the auto sector will have to be prepared for investment up $2 billion each year.

Both automobile manufacturers and component makers are betting big as the growing economy is boosting consumer spending — especially in the small car category. Passenger vehicles segment grew 31.83 per cent in April-December 2010, CVs by 34.08 per cent and two-wheelers rose 28.2 per cent.

“When metal prices went up some of our customers had also revised the component prices accordingly. But for the overall existence of an industry, which has just come out of a global financial meltdown, it is time for an image makeover. For that, we want this funding from the government for improving our technologies,” said Ashok Shah, president, Samarth Engineering Company Ltd, whose clients include Tata Motors.