SMEs in auto component sector call for interests rate cuts

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Namrata Kath Hazarika | 19 Mar, 2013
The auto component industry that comprises 70 percent of Small and Medium Enterprises (SMEs) is demanding reduction in interests rates in the forthcoming RBI's monetary policy review as growth in commercial vehicle and passenger car segments slipped beyond expectation recently.

"There is a huge potential and as we have a huge concentration of SMEs. We wish that slowdown should go away as soon as possible. We would want that growth should enter back to the entire economy. We hope that there may be interests rate cuts in the forthcoming RBI policy," said the Executive Director, Automotive Components Manufacturers' Association (ACMA), Vinnie Mehta.

He said that the small and medium enterprises (SMEs) are extremely affected by the slowdown. The growth in the auto component sector is quite upset at the moment and it is very important for the SMEs to grow in order to help the entire industry to grow fruitfully.

Mehta suggested that it is also important for the Original Equipment Manufacturers (OEMs) to handhold the Tier 2 and Tier 3 companies so that they survive and thrive.

He also said that SMEs as usual face challenges with access to capital, access to technology and people.

"...if we are able to help them to get capital, able to help them to get technology, and thirdly skilling of people and are able to enable them on this parameters, I think in the next four to five years we will really make difference to the sector," Mehta told SME Times.

Surinder P Kanwar, Chairman and Managing Director, Bharat Gears Limited and President ACMA also said, "We never want single-digit growth. We always want double digit growth. There is a lack of investment in infrastructure and our cost of production has gone up at the moment."

The sector is witnessing a slowdown in growth in the last couple of months. Although the Finance Minister has announced some positive measures in the Budget for the small scale sector, there is still lot to be done. But, the steps taken in the Budget will definitely help the sector to grow, he said to SME Times.

For this reason, ACMA along with SIDBI have singed a Memorandum of Understanding (MOU) to avail financial benefit that is a need of the hour for the sector. "We will have easy access to finance," Kanwar said.

In the Union Budget the government has announced to enhance the refinancing capability of SIDBI from Rs 5,000 crore to Rs 10,000 crore per year.

According to ACMA, an expert from SIDBI will be facilitating credit and loans to the ACMA members. This process will be conducted once a week at the ACMA office for both, capital and working capital.

The Managing Director, Nipman Fasterner Industries Pvt Ltd, Pravin Malhotra also said that innovation is limited in this sector and lack of it is resulting slow growth of the sector.

Moreover, industry stalwarts also feel that entrepreneurs should maximise their spend in innovation as it is vital. Without potential investment in innovation things cannot progress. In fact, SMEs should invest as much as they can in innovation.

Sunil Arora, heading ACMA's MSME Committee also opined, "Innovation has to be a three dimensional coordinated activity between the Government, the Industry and the Academia. Industry – Institute tie up is an essential part of the eco- system wherein institutes provide basic and applied research input."

The auto component segment is likely to grow at around 6-7 percent for fiscal 2013. By 2020, the production from the sector will be as large as US 120 billion. The size of domestic market will be USD 80-85 billion and exports will be at USD 30-40 billion. Currently, the size of the sector is USD 44.5 billion and exports is USD 7 billion till 2011-12.