The output at foundries in the country has declined between 20 and 30 per cent in the last two months following demonetisation, industry officials said.
The situation is expected to improve in another three to six months, they said. “The market is down for almost all the sectors because of the demonetisation and it might take three to six months to improve,” C.R. Swaminathan, former president of the Institute of Indian Foundrymen said.
For the last two years, the foundries’ average capacity utilisation was just 60 per cent. Last year, it went down to about 40 per cent because of the slowdown in automobiles, a major client industry for foundries.
Though the foundry industry has installed capacity of about 15 million tonnes a year, the production is only 10 million tonnes of castings.
‘Profits hit’
Up to 30 per cent production could be affected because of demonetisation. The overall turnover and profitability might come down this year, said Mr. Swaminathan.
On GST, the IIF had commissioned a study on the impact on foundries. The total tax paid by the foundries is close to 25 per cent. The tax proposed under GST is between 14.5 per cent and 17.5 per cent. “There is a belief that GST will create a level playing field. It depends on the rate levied. We have asked for 12.5 per cent,” said Nithyanandan Devaraaj, secretary, IIF. “We are not clear on what the offset in the supply chain would be. There should be no single rate for the foundries. Nearly 20 per cent of our sales is to priority sectors such as power and defence that are not covered under GST,” he said.
