How sliding value of Rupee is impacting Gujarat industries

Rajkot/Surat, 19 August 2013

Congress-led UPA government in centre with economist as Prime Minister continues to break its own records. Indian rupee today hit new low of 62.60 against U.S. dollar in intraday trade. This is historic! Here is a quick look on how sliding value of Rupee is impacting various industries across Gujarat.

Foundry
There are 10,000 foundry units. There was a time when night shifts were common, However it has been a matter of past now. Due to sliding value of rupee against dollar, raw material(scrap) prices are extremely high now. Due to high prices of raw material, production cost is also high. The industry can sustain in such circumstances only if import duty on scrap is decreased. Earlier foundry items were exported from Rajkot, but nowadays due to high production cost(that’s due to high raw material cost thanks to sliding Rupee), final product prices have gone so high that export orders are decreasing.

Ceramic tiles

There are more than 300 floor/wall tiles units in Morbi that satisfy 62% need of Indian tiles market. Due to sliding value of Rupee, prices of raw materials, chemicals and design projects procured from abroad have increased. At present, Morbi exports around 5,000 containers of final products per month to Gulf, East African countries. However importers are not ready to accept increased price of final product. On the other hand we have to increase prices due to higher input prices. If Rupee gains Rs. 50-55 level, export will see positive impact.

Brass part

There are 300-400 brass parts units in Jamnagar. Due to sliding Rupee, brass scrap import is much costly now compared to past. Against the average import of 600 containers of brass scrap in past, nowadays hardly 70-80 containers are ordered. Due to increased input cost, export is seriously impacted.

Cement

Cement industry utilizes coal as fuel, and coal is exported mainly from Indonesia, China and South Africa. Due to higher cost of diesel, ships are charging more to transport the fuel. Then add to this, Rupee has lost value against dollar. Cement prices are not only up in domestic market, but export is also adversely impacted due to price correction which is unavoidable at this end, but unacceptable at the other end.

Alang ship breaking yard

Alang imported 198 ships so far this year. Ship breakers finalized deals with international ship sellers and fixed the figure of payment in dollar as per the value of dollar against rupee at the time of deal. Now when dollar is stronger against Rupee, ship breakers are facing tough time. On an average they have to pay Rs. 1.5 crore to 2.00 crore more per ship. On the other hand local steel market is also facing tough time. Thus the ship breaking industry is facing problems at both input and output ends. Negative air at Alang yard is impacting truck transport and re-rolling mill industry adversely.

Diamond industry

Due to sliding value of Rupee, procurement coast of rough diamonds is up. On the other hand, polished diamond demand is also low. Some factories in Surat have cut down total hours of daily work, while some others have declared weekly holiday. Major units are still in ‘wait and watch’ mood. Many units are avoiding purchase of fresh rough diamonds due to higher cost. They are waiting for Rupee to regain its value. They fear that purchase of rough diamond at higher prices may harm their business, if polished diamond demand continues to stay lower.

Yarn

Yarn prices are up by Rs. 12 in last one and half month only. Due to sliding value of rupee, imported MEG-PTA and Polyester chips prices are up. Due to this POY and yarn prices are up in local market. This trend started in July this year. Against increased price of yarn, the purchase of fabric is not so interesting. Fabric prices are decreasing. This has impacted weavers and small unit owners adversely. Weavers have now stopped purchasing yarn at current high prices. Those weavers who purchased and stored yarn in July when rupee value was somewhat comfortable are the only happy people in market.