So, there’s little chance that when Sitharaman rises to present the budget on July 5, it will be a populist one. She might make allowance for a few doles of gratitude to micro industries, farmers, defence personnel and certain geographies that helped better the ruling party’s victory from good to grand. Apart from that, it’s likely to be a prudent balancing act.
The main challenge for Sitharaman is time, or rather the lack of it. She has had about three weeks from the time she took over as FM to the customary halwa ceremony on Saturday to mark the printing of budget documents. She lost no time in between in calling for crowd-sourced ideas through social and conventional media — a first.
ET Magazine visited eight industrial hubs across the country, spanning several sectors, to figure out the wish lists of businesses and to take stock of their concerns, even those not strictly pertaining to the budget. We travelled to the bicycle town, Ludhiana, in the North and the knitwear capital, Tiruppur, in the South, to diamond city Surat in the West and to tea hub Darjeeling in the East. We also went to Andhra Pradesh’s steel city Visakhapatnam, Uttar Pradesh’s labour-intensive brass city Moradabad, Uttarakhand’s only major industrial town, Rudrapur, and Madhya Pradesh’s mini-Mumbai, Indore.
We received wide-ranging inputs. A greater thrust on infrastructure and removing the bottlenecks in GST, even though the latter is not exactly in the budget’s domain, seem to be pan-Indian wishes. Others are specific to regions or sectors. Darjeeling tea producers want an anti-dumping duty on tea imports from Nepal.
The Ludhiana bicycle cluster is awaiting a big financial booster. Vizag Steel expects to do better business if Sitharaman takes a generous approach to infrastructure, real estate and automobile. And what do the 4,000-plus namkeen factories of Indore want from the FM? Read on.
Steel Dreams- Visakhapatnam
The steel city of Andhra Pradesh expects an infrastructure and logistics push from the Union budget.
By Shantanu Nandan Sharma
The massive Sardar Patel statue in Gujarat shares something in common with the Kudankulam Nuclear Power Plant in Tamil Nadu — the sinews of both have been strengthened by steel from Visakhapatnam Steel Plant, also called Vizag Steel, run by a Navratna company, Rashtriya Ispat Nigam Limited (RINL).
Other landmarks, including the Tarapur Atomic Power Station, Mumbai’s Bandra-Worli Sea Link and the Yamuna Expressway in Uttar Pradesh, have also used steel produced in this coastal city of Andhra Pradesh. Visakhapatnam, according to the 2011 Census, has a population of 17.2 lakh, with one-fifth of them directly or indirectly dependent on the steel industry.
No wonder the financial capital of Andhra Pradesh is now better known as steel city. Other major industries include shipping, petrochemicals and pharmaceuticals. Home to one of India’s busiest cargo ports, Visakhapatnam is also the headquarters of the Eastern Naval Command.
ET Magazine interviewed half a dozen senior executives and workers in the city’s steel and shipping sectors on what they expect from the Union budget to be presented by Finance Minister Nirmala Sitharaman on July 5. Their demands are largely a mix of direct budget benefits and sops to other industries which, in turn, will help the steel and shipping industries grow.
“The budget must consider incometax exemption for setting up container freight stations, logistics parks et al. A bigger thrust on ease of doing business is the need of the hour,” says G Sambasiva Rao, managing director of Sravan Shipping Services, a city-based company with a turnover of Rs 185 crore (2018-19).
He then lists other pressing needs which may not necessarily figure in Sitharaman’s first budget. For example, Rao insists that the arterial road from the port to the industrial park should be decongested by building 40-60-ftwide service roads.
Other demands include fine-tuning of the goods and services tax (GST) and some kind of protection from being regularly harassed by income-tax officials. Rao is also president of the Andhra Pradesh Chambers of Commerce and Industry Federation.
For the steel industry, the recent string of problems began with China, Japan and South Korea dumping excess steel in India after the US raised import tariff.
The concerns are understandable, as imposition of higher import duties on steel may not be possible once India signs the Regional Comprehensive Economic Partnership (RCEP) — a free trade agreement likely to be concluded later this year between the 10 ASEAN nations plus India, China, Japan, South Korea, Australia and New Zealand.
The steel industry wants to be kept out of the purview of the forthcoming trade pact. From the budget, the sector is hoping only indirect sops. For example, if Sitharaman decides to extend some incentives to infrastructure, real estate and automobile sectors, the demand for steel will instantly grow.
Vizag Steel which produces 5 million tonnes (MT) of saleable steel annually (2018-19), plans to be a 20 MT plant by 2032-33. India presently produces just over 100 MT of steel as against China’s 800 MT.
While the company’s target is ambitious, it needs to woo new clients or receive more work from its existing customers such as Larsen and Toubro, Siemens, AFCONS Infrastructure, Tata Motors and Ashok Leyland. That’s why the steel sector will be closely watching the budget.
By October, the Vizag Steel will begin a new plant in Uttar Pradesh's Lalganj, near Rae Bareli, which is expected to produce 100,000 train wheels annually. It was recently visited by representatives of South Korean majors Posco and Hyundai Steel, giving rise to speculation that they may invest in the expansion of the plant through a public-private partnership mode. Now, Vizag Steel is sitting on a mammoth 8,100 hectare land bank.
"Our plant needs to have its own iron mines. That will minimise production cost and increase profitability. Also, the Centre must give its nod to fill 4,500 existing vacancies," says J Ayodhya Ramu, a trade union leader at Vizag Steel.
Population: 17,28,128 (2011 Census)
Major Industries: Steel, shipping, petrochemicals
Budget Expectations: Steel industry expects budget sops for infrastructure and auto, which will push demand for steel Announcement of the Chennai-Kolkata dedicated rail freight corridor passing through the steel city
Surat: Diamond out of rough
A year and a half after the Nirav Modi scam cast a shadow, Surat’s diamond industry wants banks to ease lending norms and the government to lower taxes
By G Seetharaman
Just as we begin talking to Sanjay Chheta, partner of Amrut Gems, about the processing of diamonds, he asks for the blinds in the room to be rolled up. Across a glass partition, we see at least two-dozen young men looking at three-dimensional models of rough diamonds on desktop screens, deciding how these precious stones should be cut. On the floors below, the gems are laser-cut on the basis of these designs and then polished, either manually or with a machine.
These young men are among the 450 workers in this unit, which looks like a residential building from outside, owned by Amrut Gems, a diamond processing company. This is one of 7,000 such units in Surat, a south Gujarat city synonymous with diamonds and textiles. Around 90% of the world’s rough diamonds are said to be cut and polished in Surat. Diamond exports from India totalled $23.8 billion or Rs 1.7 lakh crore, in 2018-19.
Surat, Gujarat Population: 44,66,826 (2011 Census)
Major Industries: Diamond cutting and polishing, textiles
Budget Expectations: Reduce GST on job work on diamonds from 5% to 1.5-2% Find ways to increase bank lending to diamond units
There are around 8 lakh people working in diamond companies in Surat, where a diamond ex-change is being built to rival the Bharat Diamond Bourse in Mumbai. The Surat exchange will have a constructed area of 6.6 million sq ft, three times the size of its Mumbai counterpart.
However, ever since diamantaire Nirav Modi and his uncle Mehul Choksi of Gitanjali Gems were accused of defrauding Punjab National Bank of Rs 14,350 crore in early 2018, banks have become wary of the diamond industry. “After the scam, we decided to immediately repay 90% of our loans even though we had time. Banks have become a lot stricter in lending,” says Chheta.
In January, ET reported that the State Bank of India, the largest lender to diamond companies, had set a cap of Rs 1,000 crore per borrower and imposed restrictions on companies exporting to countries other than the US and in Europe.
“We don’t ask for land like other sectors and we are a non-polluting industry. The government should do something about bank lending to our industry,” says Babulal Gaudani, a former vice-president of the Surat Diamond Association (SDA). While neither the government nor the Reserve Bank of India can issue explicit directions to banks to lend to the sector, they can informally tell banks to assess the credit risk of borrowers in the industry appropriately.
Besides an increase in bank lending, diamond makers are also seeking a cut in the goods and services tax (GST) on work outsourced to a third party in the making of a diamond. It’s now 5% and should be reduced to 1.5-2%, says Babubhai Gujarati, president, SDA. In 2018, the government slashed the GST rate for polished diamonds from 3% to 0.25%.
Gaudani says Prime Minister Narendra Modi has a good understanding of the sector and its issues from his time as chief minister of Gujarat between 2001 and 2014.
The immediate demands of the sector may not find a place in the upcoming Union budget, but Gaudani is hopeful that the government will attend to the issues sooner than later. “Diamonds are a huge foreign exchange earner for India and it’s important for the government to protect the industry,” he says.
Tiruppur, Tamil Nadu: Wear, not tear
The apparel sector wants a fillip to garment exports and affordable housing for its workers
By Indulekha Aravind
Tiruppur, Tamil Nadu Population: 4,44,352 (2011 Census)
Major Industries: Knitwear and allied industries
Budget Expectations: Increase the Technology Upgradation Fund for textiles Low-cost housing and ESIC hospital for workers
In the garment hub of Tiruppur in Tamil Nadu, which produces more than 55% of the country’s knitwear, June is a time of middling business. The festival rush is still a few months away, when employees have to work longer hours to complete orders that have to be shipped out on time. But the first three months of 2019-20 point to a promising year — the industry is optimistic about clocking growth of over 15%, having recovered from the twin blows of demonetisation and GST. Manufacturers say the revenue target of Rs 1 lakh crore by 2022 that the cluster had set for itself looks achievable. Yet, they sound aggrieved.
“The Tiruppur knitwear cluster employs nearly 6 lakh people directly, with people coming to work from as far as Assam. In today’s market scenario, the garment sector is the best bet for employment generation,” says Raja M Shanmugham, president of the Tiruppur Exporters’ Association (TEA) and founder of apparel exporter Warsaw International. “This industry can create millions of jobs but it needs to be promoted and given due attention by the government,” he says at his first-floor office in the leafy neighbourhood of Sheriff Colony.
Manufacturers rue that over the years, policymakers have given the industry short shrift. A favourite quip in the city, located 50 km from Coimbatore, is that every time garment industry representatives travel to New Delhi to meet senior bureaucrats, they have to explain that Tiruppur is not the same as Tripura.
The Tiruppur cluster is made up of over 20,000 micro, small and medium enterprises in knitwear and allied sectors, which clocked revenue of Rs 26,000 crore in the export market and around Rs 24,000 crore in the domestic market last year, according to TEA.
To achieve its target of doubling this by 2022, manufacturers say they need more labour and, importantly, the infrastructure to support them. With at least half the workforce from outside Tamil Nadu, both industrialists and trade unions have been asking the government to provide housing for workers. “There should be proper housing for workers and their families,” says Shanmugham.
“Affordable housing is a big problem. It’s something we have been demanding from the government for years,” agrees M Chandran, vice-president of the Tamil Nadu unit of the Centre of Indian Trade Unions (CITU). With countries like Bangladesh and Vietnam overtaking India in the apparel sector, thanks to their free trade agreements with the US and Europe that reduce import duty to zero, Tiruppur’s manufacturers hope that India, too, might be able to hammer out a similar trade deal that would boost its garment exports.
“With wages in China increasing, Indian cotton garments are becoming more competitive again,” says CMN Muruganandan, chairman of Gomatha International.
Other demands from the industry include R&D units and an ESIC (Employees’ State Insurance Corporation) hospital, which Prime Minister Narendra Modi had announced but on which work is yet to start. “We pay a huge sum as ESI every month, workers need to benefit from that,” says R Senthil Kumar, CEO of Premier Export Corporation.
Workers are also seeking higher wages and crèches at units employing over 100 women. “I am happy at my workplace but factories should have crèches for women workers with small kids,” says S Tamilchelvi, a CITU member who works as a garment checker.
Kumar says the government should restore the Amended Technology Upgradation Fund Scheme for textiles and the rebate on state levies, which were reduced to Rs 700 crore in the interim budget from Rs 2,300 crore for 2018-19, and to Rs 1,000 crore from Rs 2,164 crore respectively. “The tech upgradation scheme should be restored and the funds disbursed fast,” says Kumar.
With India’s share of the global apparel market one-tenth of China’s and with even smaller countries like Vietnam racing ahead, the industry is keen to catch up. “We are struggling to be on a par with global competitors. The orders we are now getting are spillovers. We have to be in a position where we can grab the orders first,” says Shanmugham.
Darjeeling: Reading the tea leaves
Wants an anti-dumping duty on tea from Nepal, and an infrastructure overhaul to boost tourism
By Sruthijith KK
Namoshkar,” estate manager Shubashish Roy booms, feigning obsequiousness. “It’s a great pleasure to see you after 72 hours.” The target of his sarcasm and scorn is Arjun Chhetri, his head clerk at the Arya Tea Estate, a spectacular 120-hectare tea plantation on the misty, sun-kissed hills of Darjeeling. Chhetri, who had been absent without leave for three days, scratches his head with the affected sheepishness of the familiar headmaster-truant schoolboy routine — both parties know nothing is about to change. This exchange represents a key woe in the Rs 850 crore industry that employs about 57,000 permanent workers and makes one of the world’s great teas.
Work in Darjeeling’s Britishera tea plantations is not what it used to be. At Rs 176 per day (before provident fund deductions), wages are so low that more than half of the permanent workers don’t bother showing up, as they can find more remunerative work outside.
They neither receive them fully nor on time. They would rather get the state’s applicable minimum wages in cash, which would be nearly twice what they get now.
“Absenteeism in the plantations is now more than 50%. We can’t find people to work in the gardens. It’s a severe crisis,” says Sandeep Mukherjee, principal advisor, Darjeeling Tea Association, whose members are plantation owners of most of the 87 tea gardens protected by the Geographical Indication tag, a trade protection for produce originating in a certain area.
The area’s most influential workers’ union leader says this is just the tip of the iceberg. “If you think 50% absenteeism is bad, wait for a couple of years. If minimum wages are not implemented, it will be 100%. Nobody wants to work in the plantations under these conditions,” says Balam Tamang, a local leader of the Darjeeling Terai Dooars Plantation Labour Union, affiliated to the Gorkha Janmukti Morcha, which has been agitating for a separate Gorkhaland state carved out of the districts of North Bengal.
Plantation wages are fixed through tripartite negotiations between labour unions, the state labour department and the DTA, which represents the plantation managements. DTA’s Mukherjee says managements are happy to pay the minimum wages if the benefits are taken away. But that would mean amendment of several legacy Central and state laws implemented at various times since 1852, when the first plantations were set up on these verdant hills.
If labour issues have been hanging like a dark cloud over the gardens for years, the owners are alarmed by a new threat ¡X the entry of tea from Nepal. The districts of Nepal bordering Darjeeling enjoy roughly the same topography, soil and climate as the vaunted region. This means the difference in taste is discernible only to true connoisseurs. This is being seen as an existential threat.
India and Nepal allow for free movement of goods. So tea produced a few kilometres away from Darjeeling can be sold in the domestic market at much lower prices because Nepal's gardens don't have the socio-economic protections for workers that India mandates. Mukherjee of DTA says the market erosion due to the interloper is 15-18%. The domestic market is one thing. For years now, the quantity of ''Darjeeling tea'' sold in India has been many times what is annually produced in Darjeeling ¡X some 9 million kilograms. What the industry is particularly upset about is the muscling in on the lucrative international market.
Some 60% of the tea produced in Darjeeling is exported. When production ground to a halt in 2017, due to a threemonth shutdown as part of Gorkhaland agitations, traders overseas started promoting tea from Nepal as Himalayan Tea. This rival is already eroding their negotiating power in the export market.
The DTA wants the government to impose an anti-dumping duty on tea from Nepal, along the lines of what was done with jute from Nepal in 2017, to protect domestic industry.
If the tea industry exudes a sense of being under siege, Darjeeling's largest employer, the travel and tourism industry, is feeling the pinch as well. An estimated 1,00,000 people find employment in this sector.
Like all of India's hill stations, Darjeeling town has become decrepit and overcrowded, with traffic jams, dangling electricity lines, overflowing sewage channels and acute water shortage. Some 600 hotels dot the town. Parking is a nightmare. Taxi hubs are overrun by touts.
"The infrastructure dates back to the 1970s. Population has since exploded but the infrastructure has stayed the same. The residents of this place get municipal water for one hour in a week. Tourists are spending too much time stuck in traffic jams,'' says Suresh Periwal, MD of Clubside Tours and Travel, who has been in the business for 40 years.
Periwal says that as a destination, Darjeeling and nearby areas are massively underperforming. The place gets about 5-6 lakh domestic tourists each year, but only 30,000 of them are high-spending foreign tourists. "That's less than 0.3% of the foreign tourist arrivals in India.'' He says awareness about Darjeeling is low overseas and the region has been ignored in the government's Incredible India campaign. "We have tremendous potential.
But the roads need to improve and the Bagdogra airport needs to become an international airport.''
Moradabad: Brass Stroke
The cottage brassware industry is gasping for breath; it awaits a budget booster
By Prerna Katiyar
Moradabad, Uttar Pradesh Population: 8,87,871 (2011 Census)
Major Industry: Brassware
Budget Expectations: Lower GST; brass manufacturing hub on the city’s outskirts
It is 65 degree Celsius inside the room and Arshad Ali, covered in soot, is finishing up a brass pot meant for export. He doesn’t have a face mask or gloves to shield him from the heat of the hissing furnace.
Ali makes Rs 300 a day and in May, ahead of Eid, brass workers like him slogged for 20 hours a day to earn a little extra. “We can’t even afford to fall sick,” he says.
Here, in the brassware sweatshops of Moradabad, most houses double up as one-room factories — families are busy melting copper, zinc and lead in coal-fired furnaces to produce the shiny alloy used to make utensils and other products.
The side effects of running such mini brass factories that emit carbon monoxide and carbon dioxide are all too apparent. “Tuberculosis, asthma, cancer, cough and allergies are common among workers and their families. Children are forced to inhale the toxic fumes,” says ST Hasan, the new MP from Moradabad, who is also a doctor. He says the only solution to check these ailments is to shift the brass factories outside the city.
The Uttar Pradesh government did propose to shift all such hazardous, home-based factories to the city’s outskirts. But, as of now, a new arrangement is not yet ready although existing units are being hastily shut down. “We are not opposing the shift. But where is the new facility? Do they want us to die of hunger?” asks Ashok, who runs a brass-making unit. Over 75% of Moradabad’s population depends on making brass.
“Work on setting up a Special Economic Zone in Moradabad started many year ago and it was supposed to become a platform for all brassmaking units. But today, the hub is struggling to bring in companies,”
Meanwhile, the brassware industry -the economic lifeline of the city - continues to decline. What has stayed constant is the health hazard.
Moradabad is one of the 14 cities in India with the worst air quality, according to the Central Pollution Control Board. "We need a good melting system on the outskirts of the city to reduce pollution,"says Hasan. In the Peerzada locality, artisans are waiting outside their home-factories for electricity to return. "There are no fixed hours for power cuts.
Electricity rates are also high. We have to use generators to keep the work going,"says Fahim, who runs one such brass unit. "The government should give some power subsidy for our ailing industry." Mohammed Fakir, a daily wager sitting next door, nods in agreement. The missing middle finger on his left hand narrates another story. "I lost the finger on a polishing machine. Don't we have the right to a pension or a free health checkup amid such health hazards?" he asks. Brassware is made in four stages here: moulding-casting, finishing-polishing, engraving and enamelling.
But rising production cost due to expensive raw materials is forcing many to leave the profession and try menial jobs.
Some blame also goes to the pollution board, says Mohammed Akhlaq, owner of Bharat Handicrafts. The board is closing down homebased units, rendering artisans jobless, he says. "The police raid our houses. Sometimes they take money; sometimes our papers." He also said margins of brass makers have become less due to intense competition, demonetisation and goods and services tax.
Shahabuddin, who makes brass gate lamps, still does not understand GST. "Rafta rafta aa rahaa hai samajh (Slowly, it is making sense). What I have understood so far is that we receive input credits quite late."
Agarwal of Udyog Bharati, too, has a GST grievance. "If the government spots a mistake in GST functioning, it is covered up under initial technical glitch'. But if a trader makes a mistake while filing returns under the new tax system, he is forced to pay a penalty."
Ludhiana Punjab: Pedal on Growth
Amid stagnant growth, bicycle manufacturers and parts makers want a plan to promote the use of cycles and sops for tech upgrade
By Ishani Duttagupta
Ludhiana, Punjab Population: 6,18,879 (2011 Census)
Major Industries: Bicycles, garments
Budget Expectations: Incentives to help bring down prices of entry-level units Reduce the 18% GST on raw materials, and 12% on finished bicycles
Unlike China’s bicycle manufacturing hub Wangqingtuo, there is little on display in Ludhiana to show that the city is India’s bicycle centre, producing an estimated 1.8 crore units every year.
However, the flyover on Grand Trunk Road in front of Avon Cycles, India’s second largest bicycle maker, is decorated with paintings of cyclists in lush green parks and on clean roads. The art highlights Avon’s efforts to beautify the city. It also points towards the bicycle industry’s wish list for the government.
“Cycles are a mode of transport for economically weaker sections and symbolise social empowerment. And ours is a city of entrepreneurs making cycles and cycle parts, giving employment to thousands not only here but in other cities and towns also where people assemble bikes at selling points,” says SK Rai, managing director of works at Hero Cycles, India’s largest cycle company with a turnover of around Rs 2,100 crore.
This is why the All India Cycle Manufacturers’ Association (AICMA), representing all large cycle companies, says it is pushing the Central government to set up a bicycle development council along the lines of similar bodies for shipping and surface transport industries.
“Bicycles impact 48% of households, according to the 2011 Census — a lot more than motorised transport. We hope the Finance Ministry will unveil a national plan for the bicycle industry and provide funds to promote this short-distance travel option, as being done in many other countries,” says KB Thakur, AICMA’s secretary general.
While companies are not sure whether the Union budget next month will address their concerns, the demand in Ludhiana, which is being developed as a smart city, is that there should be dedicated bicycle tracks here for the safety of riders.
“Cities around the world have public bicycle sharing systems and our government should also include this in its smart city project. There are massive health and environmental benefits in promoting the use of bicycles as seen globally,” says Rai of Hero Cycles.
His company has signed a deal with the Punjab government to develop a 100-acre industrial park, called Cycle Valley, near Ludhiana. “We are inviting other companies as partners for this project, including some hi-tech players from China. Central schemes to develop the infrastructure for this project will help us scale up,” says Rai.
Presently, the biggest buyers of Ludhiana’s cycles are the state governments of West Bengal, Maharashtra, Karnataka, Gujarat and Tamil Nadu, where cycles are given free to school students.
Even though a revision of good and services tax rates is not part of the budget, the 2,300 or so small and medium enterprises engaged in making bicycle parts in the city want the 18% tax on raw material and 12% on finished bicycles to be reduced.
“We also want credit-linked capital subsidy and a technology upgradation scheme to help us take on cheap import of cycle parts from China, especially for high-end bikes,” says Inderjit Singh, president of United Cycles & Parts Manufacturers Association, and proprietor of Navyug Engineers that makes wheels parts, hubs and chain wheels.
Echoing the wish list of the bicycle industry in Ludhiana, Punjab Finance Minister Manpreet Singh Badal hopes Union Finance Minister Nirmala Sitharaman addresses the issue of job creation in the city, also home to a massive garment and hosiery industry. So will incentives for the commoner’s ride find a place in Sitharaman’s first Union budget? Many in Ludhiana certainly hope so.
“We have taken up the issue of creating safe and convenient infrastructure for cyclists with government many times. We are willing to fund a bicycle track in Ludhiana if the government unveils a plan” Onkar Singh Pahwa, CMD, Avon Cycles- Rishi Pahwa (L), joint MD, Avon Cycles.
Indore: Making GST less taxing
Indore’s entrepreneurs want a simplified GST and less red tape in setting up food factories
By Malini Goyal
Indore, Madhya Pradesh Population: 32,76,697 (2011 Census)
Major Industries: Namkeen, textiles, pharma, automobile, agri-trading
Budget Expectations: Simplify GST. Multiple slab rates and a complicated compliance system have created a nightmare Boost liquidity. Simplify licensing process for setting up food factories.
With its well laid-out roads and visibly good upkeep, Indore, a tier-2 city, may make headlines for being India’s cleanest. But Madhya Pradesh’s most populated city, which is an education hub with an IIT and an IIM, is also a busy commercial and financial hub often called mini Mumbai. The city boasts multiple industrial hubs, including Pithampur and Dewas, which host manufacturing facilities of companies like Tata, Kirloskar, John Deere and Arvind Mills. It now has a smart city tag as well.
Indore is known for something lip-smacking as well — street food and snacks. Anurag Bothra, secretary, Namkeen Mithai Association, says there are 4,000-plus small namkeen factories in Indore. “There were many more. But demonetisation and GST forced them to close down,” he says. Over the last decade, some of these household namkeen manufacturing units have undergone a big change.
Adhering to the guidelines of the Food Safety and Standards Authority of India, a lot of investment has gone into automating the manufacturing and packaging processes. For example, in 2007-08, Bothra’s Om Namkeen introduced automatic fryers and packaging which have not only improved the production process but also increased the shelf life of its products. Not surprisingly, its turno-ver has grown five-fold to `40-odd crore. It also has contract manufacturing orders from companies like Parle, which have pushed up its material turnover to Rs 100 crore.
He has two demands from the upcoming budget. “The government told us one nation, one tax. All I am asking for is one shop, one tax,” says Bothra. For example, he does not get any GST rebate on categories like kachori and samosa that are sold at his retail outlets but his namkeens get the rebate. “GST is so complicated that it has made our lives very difficult,” he adds.
Not too far away, Deepak Daryani is the managing director of Asha Confectionery, a Rs 400 crore company with 1,400 employees. Starting from a humble 10 x 14 ft workshopcum-house at Nanda Nagar in 1984, he now has a sprawling factory spread over 6.2 lakh sq ft, equipped with a dental clinic and a beauty parlour for workers. “Personal hygiene of the workers is very important in our line of business. This helps us maintain it,” says Daryani, who also distributes over 4,000 sanitary pads among its 600-plus women workers.
The factory, which is almost fully automated, churns out a range of confectionery that gets sold in markets like Uttar Pradesh and Bihar. Among his many budget wishes, the three big ones are measures to boost liquidity, simplify licencing process to set up food factories and to support employers in rolling out housing for workers. “The Pradhan Mantri Awas Yojana can easily partner with employers to offer housing to workers,” he says.
Ramesh Khandelwal, who trades in sugar and dairy products, also represents over 1,000 wholesale kirana merchants as president of the Ahilya Chamber of Commerce and Industry, Indore. After demonetisation and GST, traders are still suffering from poor liquidity which has severely constrained their business. “The government has made GST so complex and compliance so difficult that businessmen, many of them not very educated, are struggling and have been reduced to being clerks. We request the government to make it simple,” he says.
Rudrapur, Uttarakhand: Labour Pangs
Auto ancillary units say doing away with complexities in labour laws and easing of GST rates can give a spurt to growth
By Prerna Katiyar
Uniform and simpler labour laws are what automobile ancillary companies in Rudrapur want from the government. “Right now, multiple forms have to be filled,” says Shreekar Sinha, HR and administrative head of Endurance Technologies, which supplies auto parts to Bajaj, Hero, Honda and Yamaha. “A single comprehensive form should be made available covering all labour and other applicable laws for the convenience of the industry. Compilation should be made simpler. Like ‘one nation, one compliance’.”
He welcomes the reduction of the rate of contributions under the Employees’ State Insurance Act, 1948, from 6.5% to 4%. The government had in June reduced employers’ contribution from 4.75% to 3.25% and employees’ contribution from 1.75% to 0.75%. Sinha says this would lead to ease of doing business but reiterates the need for a common compliance form under labour laws.
Most business executives in this industrial hub about 280 km northeast of Delhi say the government should cut the goods and services tax (GST) on motor vehicles from 28% to 18%. “This will help in bringing down vehicle costs and lead to an increase in demand, which has been at a low in the last one year,” says an executive of Ashok Leyland on condition of anonymity as he is not authorised to speak to journalists.
Ashok Leyland’s plant in the vicinity of Rudrapur had recently announced a production cut. The Hinduja Group’s flagship firm said it would close its plant in Pantnagar — an integrated axle machining and assembly facility — for six days from June 24 to adjust production as sales were down.
“The auto industry is facing a slump right now,” says Gajendra Singh, HR head of Varroc Engineering, an automotive component manufacturer and supplier for Bajaj, Ashok Leyland and Tata. “Car sales are down. The cost of raw materials and overall GST on the sector must come down to spur growth.”
Automobile industry representatives say a discrepancy in the GST regime has been hurting them. “While we pay input cost to our supplier, we have to assume that he has paid his dues. There is no way to check if our vendor has paid the amount to the government or not. If he hasn’t, we are made liable for this non-compliance. This must change,” says Sinha of Endurance Technologies.
Rudrapur saw rapid industrial development after the State Infrastructure and Industrial Development Corporation of Uttarakhand Ltd was established in 2000. More than 400 companies — primarily in the sectors of automobiles, fast-moving consumer goods, pharmaceuticals, agriculture and textiles — have units in the region.
Parle Agro, an FMCG major that claims to be the market leader in mass product glucose biscuits, says the GST on the product is a high 18%. “Parle G (the glucose biscuit brand) is a mass product. It is not a premium biscuit and is the cheapest product in the segment. 18% GST is too high.
No correction has been made since the launch of the new tax regime. The tax rate has gone up by 3-4% from the pre-GST regime. It must be cut down to at least 12%,” says Sandeep Pandey, plant head of Parle Agro at Rudrapur. Referring to the operating margin of pharma companies, a representative of the industry says: “The government ought to fix a profit margin of, say, 10-20% for pharma companies. This will help cut the prices of medicines. Right now their operating margins are very high.”
Ajay Tiwari, HR head of Shirdi Industries, which specialises in plywood, laminate boards and particle boards, says the industry needs special incentives to thrive due to certain geographical factors. “Uttarakhand does not have a port. Raw materials have to be brought in from outside via road or rail. Finished goods, again, have to be transported to other states. This inflates transportation costs. There should be a transport subsidy. Similarly, electricity charges must be brought down.”
Major Industries: Automobile, FMCG, plywood, agribased industries
Budget Expectations: Uniform labour laws, lower GST, subsidy on power and transport costs
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33 Comments on this Story
Vinod Patil578 days ago
Why not author visited City in Maharashtra.... Aurangabad...which is facing slow down in industry and unemployment....???
Kishore Shivani579 days ago
QUALITY OF EDUCATION CAN IMPROVE IF RESERVATIONS AND QUOTAS AND RELATED FREEBIES AND SUBSIDIES ARE DONE AWAY WITH AS THESE GENERATE LAZY PARASITES.
Kishore Shivani579 days ago
SOURCES OF INCOME FOR GOVT.SELL SURPLUS UNDER UTILISED DEFENCE LAND SURPLUS AND ENCHROACHED RAILWAY LAND LAND ALONG THE EXPRESSWAY UPTO INDIRA DOCKS AS THIS DOCK CAN BE SHIFTED TO JNPT ALL CONTAINER STORAGE LAND UPTO THANE AS CONTAINERS BRING GOODSCFOR INDUSTRY AND ALL INDUSTRIES. ARE BEYOND THANE SELL ALL SURPLUS LAND OF DYING GOVT UNITS LIKE BSNL/ MTNL AND AIR INDIA TAX RICH AND PSEUDO FARMERS ALL WILL GENERATE TREMENDOUS AMOUNT OF FUNDS FOR THE GOVT.