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
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.