Rising input costs force cycle makers to up cost
WITH steel prices going up by almost 15 per cent in the last one month, cycle manufacturers in Punjab, mainly in Ludhiana, are compelled to enhance the costs of finished products (cycles) further, a move that may further impact their exports. Steel is widely used in industry like cycle, fastners, re-rolling etc. Hot rolled coil is now priced at Rs 29,000 per ton exclusive of all taxes and duties. This is $100 higher than the global prices. Sample this: Steel prices, in 2002 used to be close to Rs 13,000 per metric tonne. Exports have declined from Rs 800 crore in 2005 to Rs 650 crore in 2007, largely owing to the fact that steel prices have almost doubled in the past three years. The rise in prices has forced entrepreneurs to import steel from overseas. Experts say exports will decline further if stringent measures are not taken. United Cycle & Parts Manufacturers Association (Asia’s largest association of cycle & bicycle parts) general secretary Varinder Kapoor said, “Already 25% of the units have closed shops, and 25% have defaulted in loan repayment. Steel prices have doubled in the past three years. Our bank borrowing limits have not been enhanced. Under this situation exports are bound to decline further.” India is the second largest bi-cycle producer in the world, next only to China, with 90% based in Ludhiana. A month back ET had reported that mavens of the cycle industry, like Hero, Avon, Eastman Industries Limited, Deepak International, SADEM industries, August Industries, TI cycles are in a move to make the most , by putting up offices in China, so as to enhance their exports to other Asean countries. Rising cost of steel has hit other sectors like fasteners, induction furnace, rerolling mills etc as well. These industries are already in the doldrums for the past few years due to rise in input cost. As a result, companies are diversifying into auto components and hand tool manufacturing. Almost 10 to 20% of induction furnace units in ‘Mandi Gobindgarh’ (steel capital of Punjab) are on the verge of closure. Most of the units have reduced the capacity to 50%. Around 50% of scrap is being imported. ‘Mandi Gobindgarh’ in Punjab houses almost 400 units (300 re rolling mills and 100 induction furnaces). The representatives of All India Steel Reroller Association feel that nothing much has been done so far by the state government and the SSIs are dying a slow death. With a new and strict policy on the import of scrap already in place that has caused shortage of raw materiel, it is more a game for big players.