Leading industry bodies CII and Engineering Exports Promotion Council (EEPC) have expressed concerns about the problems faced by engineering exporters in the last two three months. Chairman of CII committee on Exports and Imports Sanjay Budhia said the engineering exporters are facing tough times due to factors like high steel prices and increased ocean freight.
“Engineering exporters are going through one of the most turbulent and trying times. Out of India’s total merchandise export of $320 billion, the sector contributes more than 25 per cent and is one of the biggest employment generator in the country”, he said. Budhia said unfortunately, in spite of being such an important sector, the engineering exporters are now on the verge of losing a sizeable portion of their business to other countries which will lead to large scale layoffs and permanent closure of factories.
Budhia listed that the main factors causing worry are a steep increase in steel prices. He said there has been a continuous increase in steel prices from July 2020. He said engineering exporters should get steel at least 20 per cent lower than the current price so that this hard sector can be saved.
According to him, the other main dampener is the abnormal rise in ocean freights by 70 per cent to 80 per cent. “Shipping lines are operating almost like a cartel and asking freight rates which are never heard of and just not affordable. If rates are not brought under control then Indian exports will come to a grinding halt”, he said.
He said the other main problem is the increase in prices of other inputs like corrugated boxes needed for packaging purposes. Chairman of EEPC Mahesh Desai said the MSME engineering exports are facing problems as credit is not available at the right interest rates.
The other two main factors are rise in steel prices and ocean freights to North America and Europe, he added. Desai said EEPC has requested to make credit available at Libor plus two to 2.5 per cent.