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By Admin
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Jan 28, 2026
Simple Guide on How to Calculate CNC Machine Hour Rate
Understanding CNC machining cost is essential for Indian manufacturers, job shop owners, and businesses looking to price their services correctly. This comprehensive guide will help you calculate your CNC machine hour rate with simple, clear steps tailored to the Indian manufacturing context.
What is CNC Machine Hour Rate?
The machine hour rate (MHR) is the total cost of running your CNC machine for one hour. This includes all expenses related to the machine operation—not just electricity. Knowing this rate helps you quote accurate prices to customers and ensure your business stays profitable in India's competitive manufacturing market.
Why Calculate Machine Hour Rate?
Understanding how gas cutting works is simple when broken down into basic steps.
The Basic Gas Cutting Procedure
The gas cutting process follows a systematic approach that ensures clean, precise cuts through metal materials.
1) Price your CNC machining services accurately
2) Understand your actual production costs
3) Make informed decisions about new projects
4) Control manufacturing expenses effectively
5) Stay competitive in the domestic and export markets
6) Evaluate machine ROI for business expansion
Basic Components of CNC Machine Hour Rate
Your machine hour rate comprises Fixed Costs (Overheads) and Variable Costs (Running Costs), calculated by summing these costs over the machine's effective annual operating hours.
Fixed Costs (Overhead)
These remain constant regardless of machine usage.
1.Depreciation
These remain constant regardless of machine usage.
Formula: Depreciation per Hour = (Machine Cost - Scrap Value) / Useful Life in Hours
Example: CNC milling machine purchased for ₹40,00,000 with 10-year life and 2,400 annual working hours:
1)Total useful life = 10 years × 2,400 hours = 24,000 hours
2) Depreciation per hour = ₹40,00,000 / 24,000 = ₹166.67 per hour
Note: In India, typical CNC machine prices range from:
1)Entry-level desktop CNC: ₹1,25,000 - ₹5,00,000
2) Mid-range CNC router/lathe: ₹5,00,000 - ₹15,00,000
3) Industrial VMC (Vertical Machining Center): ₹12,00,000 - ₹80,00,000+
2. Rent & Utilities
Formula: Rent per Hour = (Total Annual Rent × Machine Floor Space %) / Annual Working Hours
Example: Factory rent ₹1,00,000/month, machine occupies 10% of space, 2,400 annual working hours:
1)Annual rent allocation = ₹1,00,000 × 12 × 10% = ₹1,20,000
2) Rent per hour = ₹1,20,000 / 2,400 = ₹50 per hour
Your share of factory rent and utilities (excluding machine power) allocated to this machine.
3. Insurance & Taxes
Annual insurance policy costs for the machine.
Formula: Rent per Hour = (Total Annual Rent × Machine Floor Space %) / Annual Working Hours
Example: Annual premium ₹60,000 for 2,400 working hours:
1) Insurance per hour = ₹60,000 / 2,400 = ₹25 per hour
Industry Standard: Typically 1-2% of machine value annually.
4. Supervision/Management
Allocated staff costs for supervision and indirect labor.
Formula: Supervision per Hour = (Annual Supervisor Salary × Allocation %) / Annual Working Hours
Example: Foreman earning ₹40,000/month supervising 5 machines, allocation 20% to this machine:
1)Annual cost = ₹40,000 × 12 × 20% = ₹96,000
2)Supervision per hour = ₹96,000 / 2,400 = ₹40 per hour
Variable Costs (Running Costs):
1. Electricity (Power Consumption)
Formula: Power Cost per Hour = Machine Power (kW) × Electricity Rate per Unit (₹/kWh)
Typical Power Consumption:
1. Small desktop CNC: 2-4 kW
2. Mid-range CNC lathe/router: 5-10 kW
3. Industrial VMC: 10-20 kW
4. Heavy-duty machines: 20-30 kW
Example: A machine using 12 kW at ₹8 per kWh (typical industrial rate in India):
Power cost = 12 × ₹8 = ₹96 per hour
1.Gujarat, Karnataka: ₹7-₹9 per unit
2.Tamil Nadu: ₹7.50 per unit (industrial HT tariff)
3. Maharashtra, West Bengal: ₹9-₹11 per unit
4. National average: ₹8-₹11 per unit for industrial consumers
The company focuses on providing customized solutions tailored to specific industry requirements, working closely with clients to recommend suitable equipment configurations. What sets Competence Techno apart is their comprehensive after-sales support, including installation assistance, operator training, preventive maintenance programs, and readily available spare parts. Their commitment to quality is reflected in the use of premium components and adherence to international manufacturing standards.
2. Consumables (Coolant, Cutting Oils, Tools)
Account for cutting tools, coolant, lubricants, and other consumable materials.
Formula: Consumables per Hour = Annual Consumable Expenses / Annual Working Hours
Example: Spending ₹1,80,000 annually on tools and consumables with 2,400 working hours:
Consumables cost = ₹1,80,000 / 2,400 = ₹75 per hour
Breakdown::
1) Cutting tools: ₹40-₹60 per hour
2) Coolant/cutting fluid: ₹10-₹15 per hour
3) Lubricants: ₹5-₹10 per hour
Industry benchmark: Tooling typically costs 5-8% of total machining cost for precision work.
3. Maintenance (Annual Repairs, Spare Parts)
Formula: Maintenance Cost per Hour = Annual Maintenance Budget / Working Hours per Year
Example: If you budget ₹1,20,000 annually for maintenance with 2,400 working hours:
Maintenance cost = ₹1,20,000 / 2,400 = ₹50 per hour
Industry benchmark: Typically allocate 3-5% of machine purchase price annually for maintenance.
4. Operator Labor (Wages & Benefits)
Include the wages of the person operating the machine, including statutory benefits.
Formula: Labor Cost per Hour = (Annual Salary + Benefits) / Working Hours per Year
Example: An operator earning ₹25,000/month (₹3,00,000 annually) with ₹60,000 in annual benefits (PF, ESI, bonus):
Total annual cost = ₹3,00,000 + ₹60,000 = ₹3,60,000
Hourly labor cost = ₹3,60,000 / 2,400 = ₹150 per hour
CNC Operator Salaries in India (January 2025):
1) Entry-level (0-2 years): ₹12,000-₹18,000/month
2) Mid-level (2-5 years): ₹18,000-₹25,000/month
3) Senior (5+ years): ₹25,000-₹40,000/month
Note: Always include 20-25% for statutory benefits (PF, ESI, Bonus, Gratuity)
Complete Machine Hour Rate Formula
MHR= (Total Fixed Costs + Total Variable Costs) / Total Effective Machine Hours
Understanding the Components
Fixed Costs (Annual):
1) Machine Depreciation
2) Rent & Utilities
3) Insurance & Taxes
4) Supervision/Management
Variable Costs (Annual):
1) Power Consumption
2) Consumables
3) Maintenance and Repair
4) Operator Labor
Total Effective Machine Hours: Actual productive hours the machine operates per year (not total calendar hours)
Calculation Using Our Indian Examples
Fixed Costs (Annual):
Depreciation: ₹4,00,000
Rent & Utilities: ₹1,20,000
Insurance: ₹60,000
Supervision: ₹96,000
Supervision: ₹96,000
Variable Costs(Annual):
Power (₹96 × 2,400 hours): ₹2,30,400
Consumables: ₹1,80,000
Maintenance: ₹1,20,000
Labor: ₹3,60,000
Total Variable Costs = ₹8,90,400
Total Costs = ₹6,76,000 + ₹8,90,400 = ₹15,66,400
MHR = ₹15,66,400 / 2,400 hours = ₹652.67 per hour
Rounded: ₹650 per hour
Alternative Simplified Method
You can also calculate by adding individual hourly components:
MHR = Depreciation/hr + Rent/hr + Insurance/hr + Supervision/hr + Power/hr + Consumables/hr + Maintenance/hr + Labor/hr
₹166.67 + ₹50 + ₹25 + ₹40 + ₹96 + ₹75 + ₹50 + ₹150 = ₹652.67 per hour
Both methods give the same result. The first formula is more comprehensive for annual budgeting, while the second is useful for quick calculations.
Example Calculation (Simplified VMC)
Let's say a VMC has:
Annual fixed costs (depreciation, rent, insurance, supervision): ₹2,00,000
Variable costs (power, consumables, maintenance, operator): ₹220/hour
Productive hours per year: 1,200
Calculation:
1) Fixed Cost per Hour: ₹2,00,000 / 1,200 hours = ₹166.67/hour
2) Total Hourly Rate (MHR): ₹166.67 (Fixed) + ₹220 (Variable) = ₹386.67/hour
3) Final Billing Rate: ₹386.67 + Profit Margin (20% = ₹77.33) = ~₹464/hour
Typical MHR Ranges in India
| Machine Type | Base MHR (₹/hr) | With Profit (20–30%) (₹/hr) |
|---|---|---|
| CNC Turning Center | ₹160 – ₹200 | ₹200 – ₹260 |
| CNC Milling (Standard) | ₹320 – ₹350 | ₹400 – ₹455 |
| Desktop CNC | ₹300 – ₹400 | ₹375 – ₹520 |
| VMC (3-Axis) | ₹600 – ₹800 | ₹750 – ₹1,040 |
| VMC (Industrial) | ₹1,000 – ₹1,500 | ₹1,250 – ₹1,950 |
| 5-Axis CNC (Advanced) | ₹2,700 – ₹3,000 | ₹3,240 – ₹3,900 |
Typical Rate Range: ₹500-₹2,000 per hour depending on machine complexity, location, and precision requirements in India.
How to Calculate CNC Machining Cost for a Job
Once you know your machine hour rate, calculating the cost for a specific job is straightforward.
Formula: Machining Cost = (Machine Hour Rate × Machining Time) + Material Cost
Steps to Calculate
1.Estimate machining time: How long will the CNC machine run to complete the part?
2.Calculate machine cost: Multiply machining time by your hourly rate
3.Add material cost: Include the cost of raw materials
4.Add profit margin: Typically 20-40% markup for sustainable business
Example
Machining time: 2.5 hours
Machine hour rate: ₹790
Material cost: ₹1,500 (aluminum billet)
Calculation
Machine cost = 2.5 × ₹790 = ₹1,975
Total cost = ₹1,975 + ₹1,500 = ₹3,475
With 30% markup = ₹3,475 × 1.30 = ₹4,517.50
Final quotation: ₹4,500-₹4,600 (rounded for customer presentation)
Low Cost CNC Machine Considerations
If you're using a low-cost CNC machine (like desktop CNCs or entry-level machines), your calculations remain the same, but your numbers will differ:
Lower purchase price means lower depreciation cost
Smaller machines typically consume less power (3-5 kW vs 10-15 kW)
Maintenance costs may be lower
Consider lower production capacity when calculating working hours
May require more skilled operator oversight
Example: Entry-level Desktop CNC Machine
For a ₹3,00,000 desktop CNC router with a 5-year life and 1,500 hours annual use:
Depreciation: (₹3,00,000 / 5) / 1,500 = ₹40 per hour
Power (4 kW at ₹8) = ₹32 per hour
Maintenance (₹30,000/year) = ₹20 per hour
Operator = ₹120 per hour
Overhead (₹2,00,000/year) = ₹133 per hour
Tooling (₹45,000/year) = ₹30 per hour
Total : ₹375 per hour (suitable for small job shops and startups)
Using a Machine Hour Rate Calculator
Many Indian businesses use Excel sheets or online calculators to track these costs. A machine hour rate calculation Excel sheet typically includes:
Input fields for all cost components in INR
Automatic calculation of hourly rates
Comparison between different machines
Project cost estimation tools
GST calculation (18% on machining services)
You can create your own spreadsheet template to track costs monthly or quarterly.
Tips for Accurate CNC Machining Cost Control in India
1. Track actual hours:Record real machine running time vs. total available time
2. Update costs regularly:Review your rates quarterly as electricity tariffs and material costs change
3. Include setup time:Don't forget programming, job setup, and fixture preparation
4. Account for idle time: Machines sitting idle still incur depreciation and overhead
5. Consider efficiency: A machine running at 70% efficiency needs higher rates to remain profitable
6. Factor in GST: Include 18% GST in your final quotations
7. Monitor power consumption: Use energy meters to track actual consumption vs estimates
8. Review labor costs annually: Account for salary increments and statutory benefit changes
8. Calculate capacity utilization: Higher utilization (60-80%) allows more competitive rates
9. Benchmark against competitors: Know the prevailing market rates in your region and industry
Special Considerations for Indian Manufacturing
GST Implications
Machining services attract 18% GST
Input tax credit available on machinery, tools, and materials
Maintain proper invoicing and documentation
Export Opportunities
Export machining services qualify for GST exemption or refund
Competitive labor costs make Indian machining attractive for exports
Consider export incentives under government schemes
Regional Variations
Manufacturing costs vary significantly across Indian states:
South India (Tamil Nadu, Karnataka): Strong automotive and aerospace clusters, competitive rates
West India (Gujarat, Maharashtra): High industrial activity, slightly higher overhead costs
North India (NCR, Punjab): Growing manufacturing base, moderate costs
Tier-2 Cities: Growing manufacturing base, moderate costs
Make in India Context
Government initiatives like PLI schemes and infrastructure development are:
1) Reducing logistics costs
2) Improving power supply reliability
3) Attracting FDI in manufacturing
4) Creating opportunities for precision machining suppliers
Conclusion
Calculating your CNC machine hour rate accurately is crucial for running a profitable machining business in India. By understanding all cost components—from depreciation and power to labor and overhead—and using the formulas provided, you can price your services competitively while ensuring healthy profit margins.
Whether you're running an industrial VMC in an automotive cluster or a desktop CNC router in a small job shop, these principles apply. The key is to:
1) Gather your actual cost data specific to your location and setup
2) Calculate each component systematically
3) Update your rates regularly (quarterly recommended)
4) Monitor actual vs. estimated costs
5) Adjust pricing based on market conditions and capacity utilization
Remember that India's manufacturing sector is growing rapidly, with increasing demand for precision machining services both domestically and for export. By maintaining accurate cost calculations and competitive pricing, you can capitalize on these opportunities while building a sustainable business.
Frequently Asked Questions
Divide total operating costs (machine depreciation, maintenance, utilities, labor, overhead) by total productive hours per year.
CNC machine hourly rates typically range from $30-150/hour depending on machine type, size, complexity, and location, with basic mills around $40-60/hour and advanced 5-axis machines $100-150/hour.
Divide the total cutting length by the feed rate (cutting time = cutting length ÷ feed rate), then add setup time, tool change time, and rapid traverse time.
Multiply the total machine hours required by the machine's hourly rate (machine time cost = hours × hourly rate).
Use the formula: RPM = (Cutting Speed × 1000) ÷ (π × Diameter), where cutting speed is in meters/minute and diameter is in millimeters, or RPM = (Cutting Speed × 12) ÷ (π × Diameter) for feet/minute and inches.
Cutting speed is how fast the tool moves relative to the workpiece surface (m/min), while feed rate is how fast the tool advances into the material (mm/min).