Present tense, future shaky for Bengal small factory hub
Sanat Khan, 35, is on tenterhooks. The foundry unit where he works reopened about a week ago after remaining shut for a month due to various restrictions put in place by the West Bengal government to contain the second wave of Covid-19.
“I got paid half the wages for a month,” he says. He somehow managed to make ends meet. But what is now gnawing at him is this question: will there be another round of restrictions or intermittent lockdowns? Khan, who makes ~400 a day, can’t afford even a day’s shutdown.
But he may still be better off than the others. The 500-odd foundry units in Howrah operate largely with contractual workers. And as they faced liquidity crunch, smaller units were unable to pay the workers even half their wages during the shutdown.
West Bengal went for lockdown-like measures from May 16. Industries and manufacturing units were closed down, except for those dealing in medical and Covid protective supplies, health and hygiene care products, oxygen and oxygen cylinders, continuous process industries, and production and packaging of essential food commodities.
Towards the end of May, industries and manufacturing units were allowed to resume operations with onsite workers — provided they were vaccinated. Then, an order dated June 28 allowed production units, mills and industries to function with 50 per cent strength — again, subject to vaccination.
Santosh Upadhyay, secretary general, Howrah Chamber of Commerce & Industry (HCCI), points out that only 20-25 per cent of the foundry units were currently operational. The chamber represents more than 1,000 traders and MSME members.
While there are around 500 foundry units, Upadhyay says including the fabrication and ancillary units, the total number of units in Howrah would be about 2,000; and most of them are shut.
The stress in Howrah’s small factory hub — about 80-90 per cent linked to the iron and steel industry — is palpable not only among workers but also among owners.
“Bengal lost customers due to the closure,” says the owner of a foundry unit at Belgachia on the national highway to Howrah (there are just 200 units on the stretch).
The unit, which supplies consumables and spare parts to steel plants in India, Oman, Iran and Sri Lanka, lost out on orders to units in Chhattisgarh and Odisha.
“The steel plants were operational and they had to give away the order to units in states where industry was not under curbs,” the owner says, requesting not to be named. Export orders got delayed.
Howrah is the hub for castings, machine parts, forged and assembled parts, and caters to both India and the world. A backof-the-envelope calculation puts exports from the foundry units at ~200-300 crore a month, and February to September is the peak time for exports.
After last year’s Covid blow, the industry had recovered to near-normalcy around January. Units were operating at 80-85 per cent capacity. But the second wave washed away the gains from that uptick.
The outlets that have resumed work are faced with dwindling orders, labour shortage, surging raw material prices and logistics hurdles.
Kailash Agarwal’s JPK Metallics, which makes manhole covers and supplies to the UK and the US, is running at 50-60 per cent capacity. Labour shortage and raw material supply constraints were among the major stumbling blocks to ramping capacity. “All is not well with the industry,” says Agarwal, who started operations after June 15 with 50 per cent manpower.
“The entire chain is broken,” adds H K Sharma, who owns a fabrication unit. “First, there was an oxygen shortage, and now that oxygen is available, there aren’t enough people.” Fabrication units require oxygen for cutting.
Skilled and semi-skilled workers employed at Howrah commute mostly by local trains, which are yet to get the go-ahead from the government to resume operations. As a result, some foundry owners have had to arrange for accommodation, while others are organising transportation to ferry the critical workforce. All of this is adding to the cost.
The supply of raw material, too, has become erratic because goods trucks are facing trouble plying. This is also throttling production. These trucks require e-passes to transport goods and materials within the state and outside. Those who can afford it are now sourcing raw material locally at a much higher cost.
Raw material prices have anyway surged over the past year. For foundries, pig iron is the main raw material. From May 2020 to June 2021, pig iron prices have increased from ~21,000 to ~42,000 a tonne, says Dinesh Adukia of AIC Castings. He has, however, been able to pass on ~13,000 to 14,000 to the customers. The margins are now negative, he says.
Adukia is one of the larger players in the industry and has a steel manufacturing unit as well. But about 80 per cent are small and tiny foundry units, and runaway raw material prices have made them unviable, he says.
The small units that operate on wafer-thin margins are on shaky ground. And while Covid19 has dealt them a fresh blow, Howrah has been in the throes of a crisis for some time now.
According to industry sources, post-demonetisation, the implementation of the goods and services tax and economic slowdown, hundreds of units shut down. The second Covid wave is now adding to the uncertainty in what was once celebrated as the Sheffield of the East.