Chennai, NFAPost: The prices of raw materials used in the manufacturing of pumpset have gone up and the cost of installing a new pumpset with accessories like copper cable, pipes and fittings have increased by more than 20%.
This price increase can lead to a slowdown of the industry and decrease in farm output as farmers may delay their purchases. The Indian Pump Industry is worth Rs 16,000 crore and provides employment to around 20 lakh people directly and indirectly.
The Indian market for motors and pumps that was in doldrums last year due to non-seasonal rainfall had revived and markets had improved after COVID-19 lockdown. However, the industry is bracing for another slowdown due to the huge increase in raw material prices.
A joint meeting by three major associations of pump manufacturers – Indian Pump Manufacturers Association(IPMA), Southern India Engineering Manufacturers Association(SIEMA) and Rajkot Engineering Association(REA), representing 99% of the pump manufacturers of the country, was held recently to discuss the price increase. The price of copper has gone up from Rs 450/kg in March to 680/kg in December, a 57% increase; Stainless steel rods from Rs 68/kg in March to Rs 80/kg in December, a 47% increase; and Electrical steel price has gone up from Rs 54/kg in March to Rs 64.5/kg in December, a 20% increase.
The impact on the overall costing of the pumpset is 15%. Pumpset manufacturers operate within margins and an increase in cost cannot be absorbed by the manufacturer, the associations pointed out.
Moreover, in Tamil Nadu, there are 18 lakh agricultural pumps, of which nearly 15% is replaced annually. The share of Indian pumps and motors in the global market is around 2%. The industry had a hope that after COVID-19, the share could increase as the world was looking towards India instead of China.
“There were enquiries and the export business was up in the second quarter (July to Oct). Overseas customers have started accepting price increase of up to 10% and we can’t increase it further. Additionally, severe shortage of raw materials particularly Electrical Steels, PVC resin, Iron ore and steel scrap are providing an opportunity for the middle men to hoard material and drive up prices even further,” said SIEMA president KV Karthik.
The working capital requirement is shooting up and now there is a requirement of additional 40%. Emergency Working capital limit provided under ECGLS scheme is fully utilised by MSMEs for coping with this increase in raw material costs. If this trend continues, many MSME units will close down very soon leading to job losses. Also, booked export orders cannot be shipped for want of raw materials. This will create a negative image about Indian Pumps in the world market, Karthik added.
The associations have urged the Centre and various State governments to step in and control the price rise and aid the survival of the pump industry.