High input costs stifle electrical cable makers

Tag : cable manufacturing equipment

Faced with a sharp rise in prices of raw materials, especially aluminium and copper, the electrical cable manufacturers in the country, like their counterparts in other sectors, are struggling to stay afloat.

With the last six months recording a spurt in aluminium prices, many manufacturing units have shut down production, while some others are on the verge of closure, an official of the Indian Electrical Equipment Manufacturers Association (IEEMA) said.

“Almost all raw materials we use have registered a sharp surge in prices. Take aluminium prices, for instance. Aluminium, which has a weightage of 0.853 in WPI, was priced at about Rs 1.14 lakh a tonne on January 1, 2008. On July 16, it was Rs 1.6 lakh a tonne, an increase of almost 45 per cent in six months,” he said.
Raw material prices soar

In fact, industry sources say that during the last three years, prices of copper and steel, the other inputs for the cable industry, have grown by 100 per cent and 50 per cent respectively. The cable industry, they say, faces an inverted duty structure, with duty on finished products being more than that on raw materials. “Extreme pressure on the price front is stifling research and development, apart from resulting in quality sometimes taking a back seat,” the official admitted.

The size of the Indian cable industry is estimated at Rs 17,000 crore. According to IEEMA data, in 2007-08, the industry produced about four lakh tonnes of conductors worth Rs 5,000 crore and Rs 12,000 crore worth of cables (excluding telecom and winding wires, but including part of building wires used for industrial purpose). About 20 per cent of the industry is in the unorganised sector, which is growing in the light of the high rates of excise duty (14.4 per cent) and uneven VAT across the States.