Red tape, labour is­sues, de­clin­ing com­pet­i­tive­ness and reck­less im­ports have stran­gled the man­u­fac­tur­ing sec­tor. Will it ever make a come­back?

India Today - - THE BIG STORY - By M. G. Arun

In 2008, when Sa­j­jan Jin­dal- led $ 5.5 bil­lion JSW Steel con­ceived a Rs 35,000- crore, 10- mil­lion­tonne steel plant in West Ben­gal, it planned to source the chief raw ma­te­rial, iron ore, from neigh­bour­ing Odisha. But the plans went awry as the Odisha govern­ment pro­posed a new tax on min­ing prof­its and de­creed that half the iron ore pro­duced be in­vested in the state. “This speaks vol­umes of the ab­sence of clear poli­cies ei­ther in auc­tion or al­lo­ca­tion of re­sources,” re­counts Se­sha­giri Rao, joint man­ag­ing di­rec­tor, JSW Steel. This April, af­ter five years of wait, JSW fi­nally de­cided to shelve the pro­ject and put all fu­ture green­field plants on hold.

Caught in red tape, con­fus­ing land laws, un­cer­tainty in fuel and raw ma­te­rial sup­ply, labour is­sues and de­clin­ing com­pet­i­tive­ness, man­u­fac­tur­ers of steel, tex­tiles, elec­tri­cal goods, con­sumer durables and ma­chine tools, among oth­ers, are find­ing it in­creas­ingly un­vi­able to op­er­ate in the coun­try, forc­ing them to shelve plans or ex­plore av­enues abroad. To add to the woes, the new Land Ac­qui­si­tion Bill that en­vis­ages high com­pen­sa­tion and near to­tal con­sent from af­fected par­ties is ex­pected to raise real es­tate prices by 30 per cent and cause big delays, dou­bling pro­ject costs.

In­dus­trial pro­duc­tion growth slipped to 2 per cent in April on ac­count of dis­mal per­for­mance of man­u­fac­tur­ing. Growth in man­u­fac­tur­ing out­put has turned neg­a­tive since May this year, fall­ing by 2.2 per cent in June. In Au­gust, HSBC’s Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex fell to 48.5, led by a de­cline in new or­ders, the low­est since March 2009 and the third suc­ces­sive month of de­cline. Ac­cord­ing to the Cen­tre for Mon­i­tor­ing In­dian Econ­omy, new in­vest­ment pro­pos­als in the man­u­fac­tur­ing sec­tor slipped by 47 per cent in the April- June 2013 quar­ter to Rs 54,400 crore com­pared to a year ago.

Man­u­fac­tur­ing has been in such a free fall that of the Rs 1 lakh crore in po­ten­tial in­vest­ments from Jan­uary 2012 to date which In­dia lost, nearly three- fourth was from two large man­u­fac­tur­ing projects, af­ter the $ 84- bil­lion ArcelorMit­tal and $ 61- bil­lion Posco scrapped their steel projects in Odisha and Kar­nataka, re­spec­tively, in July cit­ing de­lay in land ac­qui­si­tion.

Pull­outs Across the Board

Plans of Vedanta Alu­minium, part of the $ 14- bil­lion Vedanta Re­sources Plc, to mine baux­ite in Niyam­giri hills in Odisha also came un­stuck af­ter 12 vil­lage coun­cils re­jected the pro­posal at a referendum on Au­gust 19, say­ing the min­ing ac­tiv­ity would in­fringe on their re­li­gious and cul­tural rights. Whirlpool of In­dia, part of the $ 18- bil­lion Whirlpool Cor­po­ra­tion, said in Au­gust that it is de­fer­ring its plans to ex­pand ca­pac­ity at its Puducherry, Farid­abad and Pune plants, while in July, Zuari Fer­til­iz­ers and Chem­i­cals

has put off plans for a Rs 5,000- crore urea plant in Kar­nataka due to land ac­qui­si­tion is­sues. The auto sec­tor, grap­pling with slow de­mand, has been cau­tious with its ex­pan­sion plans too. Bike maker Ba­jaj Auto de­ferred a plan to set up its fourth man­u­fac­tur­ing fa­cil­ity in Mun­dra in Gu­jarat in 2011, while ri­val Hero Mo­toCorp re­port­edly put off work on a plant in South In­dia. Hyundai also de­ferred plans to set up a diesel engine plant in Chen­nai, and so did Mahin­dra & Mahin­dra ( M& M), which put off set­ting up a fac­tory in Chen­nai in 2008. “In­dia should have a co­he­sive, struc­tured ap­proach to man­u­fac­tur­ing if we need to in­crease the con­tri­bu­tion of the sec­tor to 25 per

MAN­DAR DEODHAR/ www. in­di­a­to­day­im­ages. com

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