Cheaper Chinese Imports Throw A Bouncer At Local Units

The woes of the forgings industry continue, ranging from facing cheaper Chinese imports, the demand from the automotive sector to provide forgings at prevailing steel prices instead of the prices at which steel was produced and banks turning the borrowing of these units into non-performing assets (NPAs).

Some of the country’s largest forgings units are located in the Pune region and most of them have invested a cumulative Rs. 500-600 crore over the past few years to upgrade production capacities. Of these, the smaller, stand alone units are worried over these loans turning into non-performing assets (NPAs), said Association of Indian Forging Industry (AIFI), Western Region Committee member and Joint MD, Trinity Engineers, Asheet Pasricha.

“The forging industry has grown rapidly in the past four-five years and all of us have upgraded technologically to meet customer requirements. Not all are in jeopardy since some have strong parent companies with large cash reserves but some have large loans which are in danger of turning into NPAs,” Mr. Pasricha said.

They also face the prospect of competing with cheaper Chinese imports, where steel makers get a state subsidy of 15-20% for value added exports coupled with the fact that domestic Chinese steel prices are 10-15% lower than Indian. This effectively makes Chinese forgings about 35% cheaper than Indian product in India, Mr. Pasricha said.

“The government should help us and scrap import duty on steel, allowing us to import from the cheapest source. In any case, Indian steel makers have always maintained they are lowest cost producers so they can provide us steel at international prices,” he added.

Published in Economic Times dated. 20.2.2009.