‘After the Ukraine war, coke prices just soared and most units don’t have money left to buy raw material. Customers are not absorbing the price escalation’
Sixty-year-old Manik Midday in West Bengal’s Howrah is feeling the heat of the commodity shock caused by Russia’s war on Ukraine. Soaring raw material prices have lowered production levels at the foundry unit where he works translating into shorter working hours and less wages. With hundreds of foundry units around the area in the same boat, Midday knows, there is no escape from this crisis.
“I used to make Rs 700 a day and now it’s down to half as the foundry unit has slashed production with the increase in input cost. It’s a difficult situation, but across factories, the situation is the same,” said Midday.
There are about 500 foundry and forging units in West Bengal with 95 per cent in Howrah. And they are in dire straits.
Sujit Kumar Shau — who works on a weekly payment basis — has seen a 28 per cent drop in wages since February. To earn that, he has to work at multiple units because his regular employer is operating half-shifts on most days with about a third of the workforce.
Unit after unit on Benaras Road — which has a large concentration of foundry units — the of falling wages repeats itself and it’s telling on other businesses.
Sample this: the owner of a nearby food stall has seen a drop in earnings to the tune of 20-30 per cent in the last couple of months. Workers have shifted to other areas for work and those still trundling in are cutting down on spending.
“It’s now becoming difficult to make ends meet,” said the owner.
About 95 per cent of West Bengal’s foundry industry are MSMEs and they employ workers on contractual basis. But it’s not just workers who are counting losses here. The entire business order is impacted — from foundry owners who work on thin margins to labourers, moulders and even shopkeepers.
“It’s like a war in the foundry industry,” said Akash Madhogaria, vice chairman, Indian Foundry Association (IFA).
Coke is the major raw material of pig iron and iron ore, a major raw material for foundry units. “After the Ukraine war, coke prices just soared and most units don’t have money left to buy raw material. Customers are not absorbing the price escalation,” explained Madhogaria.
SteelMint data shows that the average monthly price for met coke (Cuttack) was Rs 50,000 per tonne in January and stood at Rs 58,000 (till April 12); pig iron (steel grade Durgapur) was at Rs 43,000 per a tonne in January and Rs 57,900 (till April 12).
“Raw material prices have increased so much that the survival of small units is at stake. Their working capital has become inadequate and buyers are not ready to increase prices,” said Dinesh Seksaria, chairman, IFA.
According to Seksaria’s estimates almost 20 per cent foundries have shut shop. “The rest are operating at anywhere between 20 and 50 per cent.”
Take the case of JPK Metallics. It makes manhole covers and supplies to the UK, the US and West Asia. But the unit is now operating at 25 per cent. “Export orders are slow because rates are high and customers are not willing to buy at these rates,” said Kailash Agarwal of JPK.
Howrah is the hub for castings, machine parts, forged and assembled parts, and caters to both India and the world. Girish Madhogaria, Deputy Regional Chairman, EEPC Eastern Region, pegs exports from foundry units in West Bengal at about 50,000 tonnes a month and the value at Rs 500 crore a month.
The unprecedented rise in input cost has dealt yet another blow to the small factories in Howrah that were reeling under crises the last few years on various counts from demonetisation to the implementation of the goods and services tax and the Covid-19 pandemic.
Business came to a standstill when the pandemic struck and a national lockdown was imposed. “There were no orders then. Now, there are enquiries but rising input cost is making it difficult to meet them,” said the owner of a foundry unit.
The once-celebrated Sheffield of the East is now looking to the government for help. As an immediate solution, the IFA wants temporary suspension on exports of pig iron and iron ore.
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