either in the coal or iron ore belts in the country which would spur demand.
Slow offtake of commercial vehicles has also forced adjunct units here like that of Tata Cummins, which supplies engines to the auto major, as well as that of subsidiary TML Drivelines, which produces axles and transmission systems, to act in sync and observe a similar production shutdown.
RK Sinha, president, Adityapur Small Industries Association (ASIA), a forum of around 1,000-odd medium and small ancillary units supplying aggregates and parts to Tata Motors here told FE that though the current three-day block closure matched with Makar-Tusu-Lohri festivities, which generally kept the workforce away from the Adityapur industrial area here, the commercial vehicles industry was in a “delicate health” and if things didn’t get better financially from April, many units would have to close down.”
Sinha said that Tata Motors’ output of around 3,900 chassis here in December, 2012 had been at 50% of its normal December output of previous years.
“At Tata Motors’ 50% output, we are unable to meet ancillary units' expenses; if they are not achieving at least 70% production we will continue to incur losses”, explained the ASIA president.
Sinha said though banks had become cooperative in rescheduling loans, the interest rate commencing from 13.5% onwards was hurting several of the ancillary units as they were “technically” competing in an international market today where the interest rate was much lower.
“Several ancillary units with ASIA membership which had undertaken expansion in recent times were not able to justify their capital investment as they aren’t able to utilise the additional capacity set up by them. That too is killing us,” said the ASIA president, adding that while no industry could run without a loan, especially for working capital and for making capital investments, units often got closed only due to high interest rates.
According to the ASIA president the current recession in the commercial vehicles industry was expected to continue “till at least the next six months”, with the chance however of a “small recovery” in February-March 2013 when all units associated with production of commercial vehicles in the country could, for showing a respectable production figure for 2012-13, go into production.
(With inputs from Shweta Bhanot in Mumbai)