RIP In­dus­try

Lack of in­cen­tives from the Cen­tre and fail­ure of lo­cal en­trepreneurs to add value to their prod­ucts have forced the clo­sure of nearly 19,000 fac­to­ries across Pun­jab

India Today - - INSIDE - By Asit Jolly

PUN­JAB Nearly 19,000 fac­to­ries have closed down across Pun­jab.

There is noth­ing left here,” 52year-old Ram Kishen states mat­ter-of-factly, ab­sently look­ing up at the smoke ris­ing out of his makeshift chul­lah, mea­grely fu­elled with dry­ing twigs. It re­minds him of his hec­tic shifts at the steel mill. His wife died shortly af­ter he was laid off two years ago, when the fac­tory he worked in went out of busi­ness. The once-proud steel worker, who moved from Rae Bareli to Pun­jab’s Mandi Gobindgarh town 35 years ago, lives on scant earn­ings do­ing odd jobs and spend­ing most of his time in a dank, 6x8 feet hovel for which he hasn’t been able to pay the rent for months. In­dus­try in Pun­jab is in the grip of a cri­sis and Ram Kishen’s story is one of nu­mer­ous tragic tales symp­to­matic of the cri­sis. Dis­clo­sures made by the Depart­ment of In­dus­tries & Com­merce, Pun­jab, on Jan­uary 31 in re­sponse to queries un­der the Right to In­for­ma­tion ( RTI) Act re­veal that as many as 18,770 fac­to­ries have been forced to shut shop over the past seven years ( see graphic).

In­for­ma­tion pro­vided to Jas­deepak Singh, who heads the RTI cell at the Pradesh Congress of­fice in Chandigarh, in­di­cates large-scale shut­downs in the once-bustling in­dus­trial hubs of the state, in­clud­ing Am­rit­sar, Jalandhar, Lud­hi­ana, Mandi Gobindgarh, Batala and Ka­purthala.

Mandi Gobindgarh, lo­cated promi­nently along the Grand Trunk Road (Na­tional High­way 1) be­tween Am­bala and Lud­hi­ana, starkly demon­strates the malaise that seems to be af­flict­ing Pun­jab’s in­dus­trial sec­tor. One of the old­est iron and steel hubs, in oper­a­tion since the 1930s, and still counted amongst the most im­por­tant fer­rous metal mar­kets in South Asia, Mandi Gobindgarh es­sen­tially com­prised a dense clus­ter of some 450 in­duc­tion fur­naces, coal-fired foundries and rolling mills that churned out ev­ery­thing from in­gots, con­struc­tion steel, spe­cialised high car­bon steel to ev­ery known de­scrip­tion of an­gles and chan­nels. Mo­torists on the GT Road had rou­tinely cribbed about the smog in the area but busi­ness was great and the ‘Mandi’, as lo­cals call their town, had in­nu­mer­able ‘rags-to-riches’ tales to tell. All that has changed. “The air here has be­come cleaner but the mills are lit­er­ally be­ing choked out of ex­is­tence,” says Jatin Sood, a 24-year-old mill owner who faces a daily chal­lenge in keep­ing his fa­ther’s two steel rolling units go­ing.

More than a third of the units in Mandi Gobindgarh’s in­dus­trial clus­ter—be­tween 150 and 170 steel fac­to­ries (40 to 60 more than the 111 closed units ac­knowl­edged in the state govern­ment’s re­sponse to the RTI query)— have shut down. Many have lit­er­ally van­ished. Oth­ers are be­gin­ning to rust amidst fad­ing hopes of a mirac­u­lous re­birth. Some, re­pos­sessed by banks hop­ing to re­cover pend­ing loans. And dozens more are on the verge of clo­sure.

Barely a fur­long off the high­way along the rut­ted road to Wazir­pur, three for­mer fac­tory work­ers—Sukhram, Dar­shan Singh and Kar­nail Singh—have found tem­po­rary em­ploy­ment to dis­man­tle APS In­ter­na­tional, a Rs 25-crore rolling mill that was set up less than five years ago but had to be shut down amidst mount­ing losses six months back. “Things are so bad that there are no buy­ers for the mill’s ma­chin­ery,” says Ra­jiv Sood, 46, a fac­tory owner him­self and the in­cum­bent pres­i­dent of the All In­dia Steel Rerollers As­so­ci­a­tion ( AISRA). With no one pre­pared to set up new units, he says, APS In­ter­na­tional’s per­fectly good ma­chines are be­ing sold off as scrap metal in bid to cut losses.

MAK­ING ENDS MEET

Back along GT Road, the own­ers of an­other rolling unit, Bikaner In­dus­tries, ev­i­dently hope to make bet­ter earn­ings from a commercial com­plex on their promi­nently lo­cated lot. With the last of the mill’s ma­chin­ery carted away to be sold as scrap, teams of labour­ers are now en­gaged in ex­ca­vat­ing three feet of the fac­tory floor. Raj Jin­dal, vi­cepres­i­dent of AISRA, ex­plains: “Strapped for cash, the own­ers are try­ing to squeeze ev­ery last ru­pee from their dead mills. Over the years, the soil of the fac­tory floor be­comes rich in iron frag­ments and sells at ten times the price of or­di­nary earth.”

Many mill and fur­nace own­ers have moved on. An oxy­gen bot­tling unit on GT Road, for in­stance, is now a dairy with two dozen buf­faloes while the once-prof­itable JK Mills is now part of AIPL Am­buja’s res­i­den­tial and commercial project, DreamCity. “The steel in­dus­try is ter­mi­nally ill and on dial­y­sis,” says Jin­dal, who is strug­gling to keep his own re-rolling unit, Kalyan In­dus­tries on the Am­loh Road, afloat.

Be­sides re­duc­ing older work­ers like Ram Kishen to near des­ti­tu­tion, the fac­tory clo­sures have led to a ma­jor mi­gra­tion of the steel town’s work­force. Bal­mukund Mishra, 45, of Sul­tan­pur, Ut­tar Pradesh, who started out as a wage labourer over 25 years ago and is now pres­i­dent of the Loha Fac­tory Karam­chari Union, es­ti­mates that as much as 60 to 70 per cent of the 100,000-plus work­force from Ut­tar Pradesh and Bi­har has ei­ther mi­grated in search of work to Hi­machal Pradesh, Ut­tarak­hand and Gu­jarat, or has headed home. “Aadhi di­hadi to ghar pe bhi kama lenge (They know they can earn a half-wage closer home too),” says Ram­chet Gaur, 47, who heads the Pun­jab Pur­van­chal Sabha.

Pun­jab Pradesh Congress Com­mit­tee chief Par­tap Singh Ba­jwa’s Fe­bru­ary 3 news con­fer­ence claim­ing “the shock­ing shut­down of thou­sands of in­dus­trial units since the Shi­ro­mani Akali Dal ( SAD)-BJP govern­ment came to power in April 2007” clearly has the in­cum­bent state govern­ment in a bind. In­dus­tries Min­is­ter Madan Mo­han Mit­tal, an old Pun­jab BJP hand, in­sists that the in­for­ma­tion handed out in re­sponse to Congress’s RTI query ac­tu­ally refers to in­dus­trial units that had shut down in the seven years pre­ced­ing 2007, five of which were un­der Amarinder Singh-led Congress rule. Pun­jab’s In­dus­tries Sec­re­tary Vikas Pratap Singh adds that most of the in­for­ma­tion on closed units was drawn from the last all-In­dia cen­sus by the Union Min­istry of Mi­cro, Small and Medium En­ter­prises in 2007-2008.

Their con­tention may be par­tially cor­rect, but the state ad­min­is­tra­tion, as re­flected in its re­sponse to the RTI, ap­pears clue­less about the num­ber of fac­tory clo­sures over the past seven years. For in­stance, scores of steel units that, ac­cord­ing to Sood and Jin­dal, shut down in the last three years do not even find a men­tion in the govern­ment’s re­sponse.

TAX­ING TIMES

Aware that the in­dus­try’s plight could fall vic­tim to ri­val pol­i­tics be­tween the rul­ing SAD-BJP and Congress, Jin­dal, a BJP sup­porter, in­sists, “We are nei­ther for Congress, nor BJP or the Akali Dal. Our only re­li­gion is to work for progress.” Why then do things look so ter­ri­ble in a state renowned for its en­tre­pre­neur­ial prow­ess?

Ra­jiv Sood says poli­cies pur­sued by both the Cen­tre and Pun­jab have led to the cri­sis. The prob­lems be­gan with New Delhi’s 1995 de­ci­sion to with­draw a freight equal­i­sa­tion scheme to com­pen­sate man­u­fac­tur­ers in Pun­jab for trans­port­ing raw ma­te­ri­als from source ar­eas. The is­sue was com­pounded in 2003 when the NDA govern­ment ex­cluded Pun­jab from the 10-year tax hol­i­day ex­tended to new in­dus­trial units in three con­tigu­ous states—Hi­machal Pradesh, Ut­tarak­hand and Jammu & Kash­mir. “In the old days, coal and sponge iron could be bought at the same prices it was avail­able to fac­to­ries in Bhi­lai. To­day, we have to pay a freight of Rs 2,800 for ev­ery met­ric ton,” says Jin­dal.

The tax hol­i­day in the neigh­bour­ing states that has now been ex­tended for an­other five years makes it vir­tu­ally im­pos­si­ble for lo­cal man­u­fac­tur­ers to com­pete. Fac­tory own­ers say their com­pet­i­tive edge in de­liv­er­ing bet­ter qual­ity has been com­pro­mised by higher VAT and elec­tric­ity tar­iff—higher than even Haryana, where arc fur­naces pay just Rs 5.30 per unit com­pared to Pun­jab’s Rs 6.33. Of­fi­cials, mean­while, blame lo­cal en­trepreneurs for fail­ing to add value to prod­ucts. “Value ad­di­tion is the key and mov­ing up the value chain au­to­mat­i­cally ren­ders sops re­dun­dant,” says an in­dus­tries depart­ment of­fi­cer

as­so­ci­ated with fram­ing Pun­jab’s in­dus­trial pol­icy. But the of­fi­cial ad­mits the state has no scheme to as­sist small and medium units up­grade their tech­nolo­gies. “Here, it is ev­ery man for him­self,” says Aman­deep Bhullar, 28, who builds rice shellers in Am­rit­sar.

TEN­SION IN THE AIR

Though there is re­luc­tance in ac­knowl­edg­ing the cri­sis, the govern­ment is con­cerned. In re­sponse to large-scale shut­downs in Mandi Gobindgarh, Deputy Chief Min­is­ter Sukhbir Badal an­nounced a 50 per cent re­duc­tion in VAT on steel prod­ucts on Jan­uary 21. Ear­lier, at the Pro­gres­sive Pun­jab in­dus­trial sum­mit in De­cem­ber 2013, Sukhbir had un­veiled a se­ries of in­cen­tives to at­tract in­vest­ments in hous­ing, man­u­fac­tur­ing, bio­sciences, agri-pro­cess­ing and in­fra­struc­ture. As many as 124 MoUs, worth an es­ti­mated Rs 65,000 crore, were inked with Re­liance, In­fosys, Bharti Air­tel, ITC, DLF and Hin­duja Group among oth­ers.

But in­dus­tri­al­ists point out that in­cen­tives be­ing of­fered un­der Pun­jab’s De­cem­ber 2013 ‘Fis­cal In­cen­tives for In­dus­trial Pro­mo­tion’ will ben­e­fit new in­vestors. “There is lit­tle to res­cue ex­ist­ing en­ter­prises,” says Bhullar.

Back in the steel town, own­ers of a closed Rs 40-crore mill al­low ac­cess to their de­serted premises on Nas­rali Road strictly on the con­di­tion that it would not be iden­ti­fied, fear­ing this could scare away po­ten­tial part­ners that could help re­vive the unit. A small group of work­ers goes around in­spect­ing the heavy ma­chin­ery on a daily ba­sis in the hope of restart­ing it one day. But with no res­cue plan in sight, it is clearly a los­ing bat­tle.

This is where Ram Kishen used to work and quite like the closed mill, is now star­ing at a bleak fu­ture.

Pho­to­graph by CHAN­DRADEEP KU­MAR

ASTEELFACTORYWORKER DE­SPON­DENTLY SUR­VEYS WHA­TREMAINS OFAROLLING

MILL IN MANDI GOBINDGARH

Pho­to­graph by CHAN­DRADEEP KU­MAR

WORK­ERS DIS­MAN­TLE APS IN­TER­NA­TIONAL, A STEEL ROLLING MILL IN MANDI GOBINDGARH

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