Cash Crunch Takes Its Toll Of Machine Tool Industry

The Rs 2,000-crore machine tool industry, which is reeling under the pressure of a credit crunch and subdued automobile sector growth, is likely to suffer negative growth of up to seven per cent during the current fiscal.

At the same time, the increased presence of foreign companies who are setting up their manufacturing base, particularly in the car segment has led to a spurt in the import of machine tools.

The domestic machine tool industry is heading towards a downhill slide, says A Mukherjee, executive director of the Indian Machine Tool Manufacturers Association.

The plight of machine tool industry, which boasts investments of Rs 1,000 crore, is amply reflected in the meagre below five per cent rate of return on investment.

 

This, at a time when the government is assuring a return of over 16 per cent in the capital intensive power and petroleum sector.

Mukherjee is, however, optimistic about the prospects of the industry, dominated largely by medium and small companies, and says his hopes are based on a possible industrial recovery and technological advancement of the machine tool industry.

Asserting that the industry was capable of surviving on its own, he said: We dont want protection. All we seek from the government is a rationalised tariff structure.

Mukherjee said that all inputs for the machine tool sector should have rationalised tariff, and excise on capital goods must be adjusted in a manner to encourage investment in production.

Representatives of the machine tool industry recently met industry minister Murasoli Maran and his secretary T R Prasad and presented an assessment of the contemporary scenario, saying that domestic industry has been squeezed by cheap imports from China and Taiwan.

Demanding a mechanism to monitor dumping, the industry asked government to withdraw the export promotion capital goods (epcg) scheme as import duties on machine tools were already very low and there were instances of the schemes misuse.

Machine tool production in India is worth only about Rs 800 crore as against imports of over Rs 1,000 crore, industry sources said.

On the other hand, Taiwan boasts of a production of US $1.8 billion while china ranks seventh in the world with $1.8 billion worth of output in 1996.

Despite adopting new technologies and switching over to customer-specific production with an emphasis on maintenance-free machines, over 70 per cent of domestic requirements will have to be fed by imports by the turn of the century, the apex body of machine tools manufacturers predicted.

Out of an estimated Rs 5,500 crore market by 2001-02, the share of domestic producers would be only about Rs 1,700 crore, it added.