If plants making pumps, wet grinders and engineering components making plants were the driving force behind the thriving manufacturing sector in Coimbatore, 600-odd foundries were the backbone of all these units. But these are facing a bleak future and the employees there are uncertain about their fate.
The sharp increase in raw material costs and pending GST refunds are weighing heavily on the units. The prices of raw materials like pig iron and chemicals have gone up by 40% to 100% in the past three months.
Unable to bear the price rise and mounting debts, more than 400 foundry units have decided to shut their business for two days from Friday in protest, demanding the government address their needs.
While more than 2 lakh workers in the foundries would lose their wages for two days, most of the manufacturing units of pumps, wet grinders and textile machinery where more than 5 lakh people work, are likely to take a hit as these cannot function without the casts supplied by foundries. “We have been requesting both the state and central governments for months, but they are not heeding our demands,” said A Siva Shanmugakumar, president of Coimbatore small and medium foundry owners’ association. The units are likely to lose more than Rs 100 crore during the shutdown.
The prices of raw materials, especially pig iron, scrap and coke (a solid carbonaceous material derived from coal), have been steadily increasing since the implementation of GST; in the past three months alone the prices have shot up by 20%. Shutting down iron ore quarries in Goa is cited as the prime reason. As coke produced in the country is not fit to use in foundries, it is being imported from China and Australia, and the imports have reduced after the coal mines there were shut to control pollution, Siva said.
To make the most out of the situation, middlemen have hiked the price of these materials.
“Before implementation of GST, the units which had less than Rs 1.5 crore as their annual turnover had to pay only 5% as Value Added Tax (VAT) and were exempted from paying 12.5% excise duty. But the exemption was removed post GST and the foundry units, without any difference, have to pay 18% as tax,’’ said a small-scale foundry owner. The government has to bring the small and medium units under the 5% slab,’’ he said.
CITU district secretary C Padmanaban said the situation has cast a shadow over the livelihood of workers in the foundry units. “If this situation continues, many of them will lose their jobs,” he said. The CITU has extended support to the two-day strike.
Apart from taking necessary steps to reduce the price fluctuations, the government should also create a raw material bank to manage the situation when the demand increases. We extend our complete support to the demands of foundry units,” said K Maniraj of the Kovai Power Driven Pump and Spare Parts Manufacturers’ Association (Kopma), explaining that with the increase in price of castings, the price of pumps and spare parts would also increase as a product needs to more than 50% casting.