The Indian foundry industry is the 3rd largest global producer with the production capacity of 10 million tons of castings for various applications in manufacturing sector (as per the world casting census reported by Modern Castings, USA in Dec 2014).
Auto & auto component sector consumes approximately 35% of the total casting produce. The demand of castings for the auto sector is likely to go up three folds in next 10 years. Various global foundry players are establishing manufacturing set ups in India for outsourcing the cast components for their global operations and because of the promising potential the sector has other players are also looking forward to capitalize on such opportunity.
China ranks as the largest casting producer contributing approximately 45% followed by USA with a contribution of 12 % to the global production, whereas India produces only 10% of the global casting produce valued at approx USD 18 billion.
Direct exports from India of castings are approximately USD 2.2 billion & another USD 2 billion of finished products and sub assemblies made of cast parts. This reveals that there is ample scope for the Foundry Industry in India to improve its market share globally.
The strength of Indian Foundries lies in consistency, reliability, transparency & ability to produce engineered castings at competitive cost. India also has an advantage of large English speaking skilled workforce. On the other hand, Chinese foundries have advantages of scale .There are various global players who have invested in China & have been operating there since last few decades.
But India has been a laggard in attracting investments in this sector & for that matter in other sectors too because of poor infrastructure, power availability, cumbersome and time consuming procedural delays, unpredictable business policies, labour laws etc.
With a lot of noise about government’s “Make in India “initiative which promotes ease of doing business, there are various reforms, following which will enable the conversion of contingencies to reality. Also the challenges faced by the exporters like high transaction costs, long transit and clearance time at ports etc needs to be addressed to strengthen exports and make India a global manufacturing hub.
Chinese foundries are increasingly becoming less competitive as the cost of power & labour is gradually increasing. Moreover, several buyers especially in India do not find it logical to import from China due to reliability, inconsistency and the cost of imports. Even other overseas buyers are gradually shifting their outsourcing to India slowly. This opens immense opportunities for the Indian Foundries to capitalize on the positive sentiment of the industry.
There are only a few foundries in India which are medium and large scale units while a large number of units are operating at various operational levels. Compared to Indian Foundry Industry, Brazilian Foundry Industry is much smaller but it still has more units of large scale foundries (more than 100,000 Tons per annum production capacity).
Auto sector, as we all know is extremely cost sensitive and even the drive for ever increasing fuel efficiency & safety standards for the players in this sector cannot be compromised. In order to meet the needs of the present Auto sector, foundries need to maintain infrastructure of the highest stature yet supply castings at competitive cost. Also there is a need to focus on scale, speed & sustainability along with continuous attention towards skilling the workforce.
While the government is striving to make policies, facilitate new investments and joint ventures with global players to improve infrastructure and ease of doing business, the industry should also look at bringing about transformation in various areas.
With the increased use of modern design and manufacturing tolls (including increased use of IT) and increased demand for goods with competitive costs and improved response time, the industry must focus on automation, scaling up operations, and also add value by producing ready to use finished castings & sub assemblies to meet the demands for ever changing auto industry.
The industry is witnessing issues with sand availability which is a key raw material for the foundry sector. This is majorly due to mining issues; hence, we look forward for support from the government with regards to timely clearances for mining and recycling of sand by providing credit at affordable terms. This will not only address the issue of availability of sand but also help in waste reduction and environment protection.
There are just a few institutes for training of foundrymen like NIFFT /PSG and initiative by IIF through its centre of Education & Training and through its Kolhapur Chapter in PPP mode with government and the local Polytechnic.
The existing institutes / polytechnics / ITI are having outdated infrastructure and need upgradation to suit the modern day training needs of the industry. The government needs to establish at least two new institutes like NIFFT and upgrade the infrastructure at NIFFT Ranchi as well as polytechnics and ITI’s near all foundry clusters.
Since foundry is power intensive, the availability of good quality power consistently at competitive tariff is paramount for competitive operations and global competitiveness of the sector and for supporting manufacturing.
There is a need of substantial attractive differential in power tariff during peak and non peak hours so that the units are motivated to shift power intensive operations towards non peak hours.
With the business sentiment having improved in India, in the coming years we will see improved business activity which will consequently push the demand for foundry products as well as exports. We envisage that the exports of direct castings will grow three folds to in next 10 years to 7-8 USD billion & another USD 5-7 billion for components /sub assemblies made of cast parts
With a view to be self sufficient to meet the requirements of the evolving foundry sector, all the stakeholders i.e.; the policy makers, industry & industry associations must come together to strengthen the foundry industry of the country.
About Vikas Garg
Garg is the President of the Institute of Indian Foundrymen. He is also the Managing Director & Owner of ForaceIndustries.