Next to textiles, the electric pump industry is considered a pride of Coimbatore. The Rs. 5,000 crore sector has a large presence in the water pump market and the city’s well-known units also specialise in the manufacture of industrial pumps. The motor and pump industry supplies over 45% of India’s requirement, employing about fifty per cent of the total six lakh labour force.
The medium and small scale pump industry alone feeds about 30,000 micro and tiny units in Coimbatore. The struggles of these sectors could have a cascading impact on the demand of other sectors, say industry sources.
The pump industry is currently able to achieve only 50 per cent of the usual turnover. Only 30 per cent of the 3000 pump manufacturers are operating currently, say industry sources.
Here are the reasons cited by industry sources.
“After lifting of lockdown restrictions, the market is limping back to normalcy both in manufacturing as well as distribution. But prices of raw material are spiralling amidst an overall slowdown in the economy. The units were already sitting on unsold stocks when the production resumed post-lockdown. After total closure during the crucial seasonal months of March-April-May, this kind of a re-beginning was not expected,” says V. Krishnakumar, President, South India Engineering Industries Association (SIEMA).
At the bottom-most layer of the pump engineering value chain is the micro and tiny industry, which is hard hit too. “The woes started for the micro and tiny industry sector with the introduction of GST. It continued till the onset of COVID-19 and the pandemic dealt a severe blow,” says, M. James, President, Tamilnadu Association of Cottage and Tiny Enterprises (TACT).
On the steep rise in input costs, Mr. Krishakumar elaborates that the price of copper, which is one of the main raw materials used in the manufacture of motors and also some parts of pumps, has increased by around 25% compared to June 1 level. Price of cable is revised at least two or three times because of this. Cost of aluminium used in the manufacture of motor has increased by more than 15% while the price of lamination steel and castings has also increased by about 10%. Pig iron used for producing castings for the pump industry has also seen a price increase of about 10%.
The exorbitant increase in diesel price has resulted in an increase in the transportation cost for both incoming raw material and outgoing finished products. Diesel price hike during this period is around 14%. This has resulted in freight charges going up by about 20%. Labour shortage that too mainly in the skilled force is also creating problems which add to the cost,” Mr. Krishnakumar says.
R. Ramamurthy, President Coimbatore District Small Industries Association, says the industry is operating only at 50 per cent capacity and only about 25 per cent of migrant workers from Bihar and Odisha have returned. The return to normalcy will hinge on maximum return of migrant workers who occupied about 50 per cent of the labour force of Coimbatore. Another major factor for revival would be liquidity in the hands of all stakeholders.
Mr. James says, “The micro and tiny units are the most neglected during the pandemic. The 30,000 micro-units in Coimbatore doing job work for the medium and small scale industries employ about 50 per cent of the migrant workforce. Banks did not come to the rescue of the sector as they are after all job workers. Currently, only 30 per cent of the units are able to function.”
Mr. Ramamurthy predicts that some improvement can be seen only in October. There will be break-even only around March 2021 while the back-to-normal will be only in 2021-2022.
“While controlling Coronavirus is not in the hands of the industry, the factors like steep price increase of steel of about Rs.4000 per tonne during times of low demand by large steelmakers should be controlled by the government. CODISSIA has also sought extension of moratorium up to March 2021 and conversion of the loan and interest repayment into term loans as the low level of operation means low revenues to repay loans and interest. The units are barely able to meet the current operational costs,” he says.
Mr. Krishnakumar says, “To cover at least a part of the cost increase of their finished products, they may be forced to go for a price increase, which will adversely impact the farmers. SIEMA, hence, appeals to the government to look into these problems and do the needful to solve the raw material price issue,” he says.
Mr. James wants the government and the banks to change the perception about the micro and tiny sector by looking at them as the root source of GST revenues and give it the due importance in its bailout policies. On a note of uncertainty, he says, it is hard to predict how many units will survive this unprecedented crisis.