The steel forging industry is in a tight spot. It bought steel when prices were at an all-time high. With the recent fall in prices and in demand, it's unable to recover costs. CNBC-TV18’s Kenan Machado reports.Steel slide cracks forging.

Deven Doshi, Vice President of the Association of Indian Forging Industry is a worried man. Doshi has been hit by a double whammy – firstly, sales have fallen nearly 50% since August last year, and exports almost completely wiped out. Secondly, the industry is stuck with high-cost steel stocks, which have to be sold for a lower price.

Deven Doshi, Vice President, Association of Indian forging industry, said, “The forging industry in the last year has had severe issues with continuously increasing steel prices."Doshi said from August-September onwards the demand has completely crashed. November, December and January have been especially bad months, where a lot of forging companies have been working on a three-day week or a four-day week.

"The situation remains bad. Therefore a lot of forging companies are now shutting shop,” he added.The automobile industry contributes to 80% of the Indian forging industry's sales and petroleum, chemicals, defence and the railways account for the rest. But with auto demand, and new investments in other sectors falling, the industry has taken a body blow. 

The forging industry wants help from the government. Top on the list: more export benefits, special interest rate schemes and a rebate on light diesel oil. Industry representatives warn that 2 lakh people may lose jobs, if the government does not respond.

Published in Money Control dated. 26.3.2009.