Hosur vendors take charge of their destiny

Come 2013 and there will be no power cuts in Hosur industrial town, an emerging auto component hub on the outskirts of Bangalore. The large, medium and small scale industrial units in the area are working on a plan to buy their electricity from an upcoming thermal power plant. In addition, component producers in the Hosur industrial estate have teamed up to cut their raw material cost by around 30 percent by procuring hot rolled (HR) and cold rolled (CR) steel sheets and coils in bulk and processing them at a common facility centre (CFC).

There are around 2,000 automotive and non-automotive manufacturing units in the Hosur industrial estate of varying sizes. Of this, around 1,400 units are classified as micro units that cater to the auto sector. The Union ministry of Micro, Small and Medium Enterprises (MSME) has identified this area as a 'Cluster of Engineering (Auto Component) Units' and included Hosur in this programme. While the power procurement from the private thermal power unit will be implemented through their own funds, the entrepreneurs in Hosur have availed government aid to establish CFC to process raw material.

The frequent power cuts and expensive raw materials in recent years have affected the margins of manufacturers, and vendors in Hosur in particular. As a result, output has declined impacting supplies to OEMs and Tier 1 and Tier 2 auto component makers.

Speaking to Autocar Professional, K Ramalingam, president of Hosur Small and Tiny Industries Association (Hostia) explains, “We have partnered with a private power-generating company in Tuticorin in coastal Tamil Nadu to get regular power supply to run all sorts of factories in Hosur.”

Hostia has signed an agreement with Coastal Energen to purchase 150 mega watt (MW) of power. Coastal Energen, the flagship company of Rs 2,500 crore Coal and Oil Group, is setting up a 1,200 MW coal-fired plant in Tuticorin, 500km from Hosur. The company is expected to commission it by 2013. “Currently we are negotiating with the Tamil Nadu Electricity Board to bring power from Tuticorin through its network, ” he adds. “As per government regulations, High Tension (HT) consumers can get the Group Captive Power (GPV). We are also requesting the government to extend this benefit to Low Tension (LT) industries. To achieve this, we need dedicated feeder lines. We, Hostia, made arrangements with TNEB to make dedicated feeder lines for this purpose at our cost,” he claims. To purchase 150 MW of power from the private thermal power producer through the TNEB network will cost around Rs 780 crore per annum, he says.

When the power distribution stabilises, auto component units are expected to increase output levels to cater to requirements of vehicle manufacturers and Tier 1 and Tier 2 vendors across the country. OEMs such as Ashok Leyland, TVS Motors, Kamaz Vectra, Ford, Hyundai, Royal Enfield, Tata, Bajaj, Mahindra & Mahindra, Toyota and many other domestic and international auto players procure parts from Hosur-based auto component producing facilities. ALL and TVS Motor have manufacturing plants and around 500 to 600 tiny auto ancillary units in Hosur depend on them. In addition, companies like Harita Seating, Uma Precision, Exide, Rajsriya Group, Avtec and Tenneco have factories in the area.

On the raw material front, steel is a major raw material. It’s not possible for tiny auto ancillary units to procure steel sheets in bulk. With rising steel costs, purchasing steel sheets in a piecemeal manner is increasing production costs. To overcome this, Hosur’s entrepreneurs have formed a Special Purpose Vehicle, Hosur Small Micro Engineering Components (HOSMEC) to establish CFC under the cluster development programme, says Ramalingam, joint MD, HOSMEC.

The CFC will have a centre for decoiling, straightening, pickling and shearing of HR and CR coils and sheets. At present, local parts producers are making big payments to test their products in Bangalore-based certified laboratories. To avoid this, he says the CFC will house a testing-cum-calibration centre to provide mechanical, chemical and physical tests for the products manufactured in Hosur. It will also offer worker training pogrammes. The steel coils and sheets will be procured in bulk, processed at CFC and supplied to HOSMEC members. The CFC is expected to process around 50,000 tonnes of steel at 4,000 tonnes per month.

Potential component hub

With the automotive segment growing in size in Karnataka and Tamil Nadu, the automotive component giants are looking to set up their shops at Hosur, located on the border of both the states. In 1975, the State Industrial Promotion Corporation of Tamil Nadu (SIPCOT) had developed one of the country’s largest industrial complexes covering an area of 1,370 acres in Hosur. Now, with the MSME ministry having identified this area as an auto component cluster, it paves the way for this area to emerge as a top component hub in the future.

The CFC is being established at an estimated cost of Rs 6.9 crore, of which the Centre will contribute Rs 4.39 crore, the state government Rs 70.75 lakh and HOSMEC, Rs 1.05 crore. The remaining Rs 75 lakh will be in the form of a bank loan. Currently 10,000 square feet for building the CFC has been constructed. The installation of machinery will commence soon and the CFC will begin operations it March, adds Ramalingam.

As per Detailed Project Report (DPR) prepared by the HOSMEC, TVS Motor and Ashok Leyland are two major consumers of steel used as raw material in the local auto ancillary units. TVS Motor requires 4, 064 tonnes of steel per month to make number plates, carrier plates, frame brackets, mudguard, stand, chassis fitments, seat fitments, muffler couplings, engine mounting and seat mounting assemblies, according to the DPR.

ALL’s facility at Hosur consumes 18,970 tonnes of steel per month through components like diesel tanks, fan rings, number plates, air tanks, brackets, modulators, spare wheel carriers, control brackets, pedal support, clamp plates, anti-vibration packing, spacer plate and adopter plate while other auto and non-auto manufacturing facilities require 659 tonnes of steel. In total, the Hosur industrial estate consumes 21, 593 tonnes of steel per month.The proposal to purchase power and the establishment of CFC to process and supply steel raw material at concessional rates have increased the confidence of component manufacturers in the industrial town.

S Dennis, managing partner, Dynamic Tooling Systems says, “We require around 20 tonnes of steel to produce various sheet metal parts." The company, set up in 2002 with an investment of Rs 1 crore has a Rs 5 crore turnover and supplies sheet metal parts to the companies like TVS, Royal Enfield and Hema Engineering. It buys steel in the open market in which sheet sizes are standard. Therefore, there is wastage when sheets are cut. When CFC supplies raw material at concessional rate, he says around 30 to 40 percent of cost can be saved on raw material alone.

Another entrepreneur, V P Annadurai of Shanmuga Toolings, says he was making turnover of Rs 50 lakh per annum till two years ago. Now frequent power cuts and raising raw material cost have affected his company’s growth. He says the MSME-driven auto cluster programme will boost the auto component industry in Hosur.

JAISHANKAR JAYARAMAIH