Valves<br>Profits amidst problems
By Harish Rao and Dev Dutt
The Rs 700 crore Valves indus-try has been growing at a steady pace of 10-12 per cent annually. Today, nearly the entire requirement of valves in the country is met by domestic manufacturers. Thus, it is not only the volume growth but also technological development that have made significant contribution to the current status of the valves industry.
The export of valves is not significant but it is nonetheless growing at a healthy rate. Paresh and Baiju Thaker, the director-duo of Arpita Enterprise, say, "The Indian valves industry is currently enjoying the most favourable period, full of export orders and enquiries. In fact, this is the ideal time for the Indian valves and pumps industry to look into multinational demands and quality requirements." They further claim, "Being economically priced and with availability of low-cost labour, we are flooded with a good number of orders, more so from abroad." Though that may not reflect the general trend in the industry it certainly points to the shape of things to come.
India is already a manufacturing hub for many internationally renowned valves and pumps manufacturers like Kestone, Crane, Audco, Flowserve, Durco, A.K., KSB, Spirex Sarco and Xomox. Yet another plus point of Indian export-oriented valves manufacturers in the Asian market is that they can communicate well in English compared to other Asian nationals, and the Indian market is often preferred over its Chinese counterpart.
On the flipside, the valves industry is facing numerous problems, which it is able to cope with it. For instance, the energy sector is one of the biggest users of valves. Most of the companies in this sector are owned by the government. These companies use the tendering method to buy their requirements, which is faulty, time-consuming and outdated. Says Juned V. Shariff, Director, Niton Valve Industry Pvt. Ltd, "Their tendering process is faulty and lacks transparency. As a rule SSI units get some favours over others. For example, SSI units need not pay EMD nor do they have to pay for tendering documents. The main criterion for selecting the supplier is the price. Quality comes next. In India, commercial evaluation takes place first followed by technical evaluation. Abroad it is just the other way around."
The non-availability of easy funds for expansion and working capital is another cause of worry for the valves industry. According to Paresh and Baiju Thaker of Arpita Enterprise, "Neither the Central nor the state governments are supporting us by way of low-interest financial loans, help for technological upgradation like installation of computerised machinery and a network of quality control laboratories. Ideally speaking, the government should provide interest-free finance to quality manufacturers who are awarded ISO 9000, CE and API (American Petroleum Industries) standard certification monograms."
The recent spurt in the prices of metals, especially steel, has added to their list of woes. Says N.V. Venkatasubramanian Deputy General Manager - Valves Business Unit, L&T Ltd: "As steel castings, forgings and plates account for bulk of our raw materials, the steel price increase has put our margins under pressure. We might be forced to pass on a portion of the increase to the customers." Shariff concurs, "The steel price is increasing and it is affecting us. It has increased by at least 10-15 per cent. Earlier we used to get material for Rs 45/46 per kg. Now we are paying Rs 52 per kg. As a result, our export margins are under pressure. We need around 100 tonnes of steel every month. On the one hand we have to pay a higher price for steel and on the other the dollar value is depreciating. We are affected both ways. In exports, we enter into long-term contracts. Thus, fluctuations in the value of dollar and price of raw materials cannot be adjusted in the selling price."
Despite these problems, the future for the valves industry looks bright. Most of the people Project Monitor spoke to were bullish about the future. The industry's future will mainly depends on activity in user industries like water treatment, fertilisers, shipyards, collieries, refineries, steel and power sectors. "Looking at the trend in the medium term, demand is expected from water supply and power sectors," Paresh and Baiju Thaker feel. According to L&T's Venkatasubramanian, "We expect oil and gas, pipelines and pharmaceuticals sectors to grow at a rapid pace in the next year and we are anticipating a spurt in demand." Juned V. Shariff of Niton is also optimistic about the future. Says he, "Several refinery projects are coming up in India like the Panipat, Bina and Bhatinda refineries, and expansion of existing refineries. Besides, NTPC is also setting up several power projects. Therefore, we feel the demand for valves is going to be very high in the coming years."
Valves<br>Profits amidst problems