Over two decades ago, Vijay Kumar, the maker of cricket balls under a reckonable brand name Shakti was aspiring to grow bigger but today he has like several other manufacturers at Punjab’s sports goods hub, Jalandhar turned to trading since the business slumped for want of much needed timely government support.
He stopped manufacturing cricket balls about a decade ago finding it increasingly unviable. Many from his segment, amid trend of their younger generation settling abroad, either turned to trading of sports goods or shifted to Meerut in Uttar Pradesh or neighbouring J&K where state governments offered incentives.
The story of the flight of Punjab’s industry to other states-especially after package of tax exemptions announced for the hill states during tenure of the Vajpayee Government in 2003- is not confined only to sports goods segment of the Micro, Small and Medium Enterprises (MSMEs).Even the large and mega units flew away to set up shops in these hill states of Himachal Pradesh, Uttarakhand and J&K.
The distress in Punjab’s business and industry is certainly not an overnight phenomenon. With pan India focus on farming sector, given the unfortunate spate of farmers suicides, the attention to the unmitigating suffering of the urban entrepreneurial class reeling under heavy debts and taxes has somewhat been undeservingly overlooked.
Ask any industry leader from Punjab’s leading industrial centre-Ludhiana or from relatively smaller, Amritsar and Jalandhar-the common refrain is that they have been let down by successive governments particularly during the last decade. Their suffering began during the days of terrorism followed by discriminatory special package of tax exemptions to the hill states. The demonetization and new tax regime of Goods and Services Tax (GST) caught them unprepared and hit badly when they were looking forward to achhe din.
According to Director Industries Punjab, DPS Kharbanda, there are total 1.60 lakh MSMEs which constitute roughly about 95 percent of the total industrial units of the state. There is no latest confirmed figure of how many have been closed down, he added. However, the government record of 2015 showed that 6,550 industrial units were declared sick and 18,770 units either shut down or migrated out of the state since 2007. Amritsar-based president of Punjab Pradesh Beopar Mandal, Piara Lal Seth, who put this number to be around 22,000, claimed that the situation worsened since 2015.
The depleting bottom line due to piling liabilities over the years have rendered them uncompetitive and contributed to growing insolvency. A situation has arisen wherein these small players have started attracting severe bank recovery measures of attachment/auction of moveable and immoveable assets publicized through newspapers which they find stigmatising. For instance, there were about 215 such cases in Ludhiana in April 2017 which have since risen to over 300. Jalandhar accounted for 212 such cases for the same period and the number is still counting.
In the gloomy situation, these days one gets to hear, in business circles, hushed tales of deaths attributed to financial distress. “No business family will openly accept this but deaths under acute strain of financial liabilities is a chilling reality. The desperate entrepreneurs may not be committing suicides like small and marginal farmers,” alleged Ravinder Dhir, a Jalandhar-based owner of sports goods brand Dixon and founding member of Khel Udyog Sangh.
Where does it lead to? Will the Amarinder government live up to its promise of alleviating the situation made to the industry before February 2017 Assembly elections?
In run up to the 2017 Assembly elections, the Punjab›s Finance Minister Manpreet Singh Badal, among others Congress leaders held parleys with the leaders of industrial organizations to prepare a blueprint constituting their demands for restoring health of the ailing industry. He made a commitment to implement this if the Congress was voted to power which it did with a thumping majority.
The Amarinder government is ready with draft of the new industrial policy which may be ratified in the next Cabinet meeting whenever it is held.
The draft included a proposal of 100 percent 7-year exemption of the State GST to the new MSMEs. Besides meeting the long pending demand of reducing the power tariff to Rs 5 per unit for 5 years, the draft includes some incentives for the modernization of the existing units in this sector. If offered across the board, the time-bound lower power tariff should come as a relief for the tottering existing industry.
But will this be suffice to lift the ailing MSMEs which are seeking nothing less than a comprehensive relief package on the pattern of farm debt waiver.
As Kharbanda put it, the existing units have already been covered in the previous policy. “There are incentives for modernization, upgradation of these units in the proposed policy draft,” he said.
Even if the government offers to incentivize expansion of the existing units by way exemption of the State GST alone, it is not going to help. “Any expansion plan by us in current scenario is surely unviable because we are struggling to survive. It›s time only the corporate entities can afford to expand, not us,” argues Seth.
“See, if the past policies were so industry-friendly, we should not have reached the present woeful stage. The policies look good only on paper. The industry is victim of vote bank politics in predominantly agrarian Punjab,” fumed Dhir who was the Amritsar district president of the BJP’s Trade and Industry Cell. He left the party in 2008 after being asked to desist from publicly raising industry›s issues during tenure of the Akali-BJP government.
A relief package for sick units is also part of the new policy draft in addition to the modernization measures for the existing units. There is, however, no official record of the total number of sick units. “The need of the hour is to provide a package of exemptions though time-bound for the existing units which are on the verge of becoming sick and they constitute majority of the MSMEs,” argued Charanjeev Singh, General Secretary, Knitwear and Textile Club, Ludhiana.
Faced with whopping debt liability of 2.08 lakh crore, the state government is looking for big ticket investments and as such, the new large and mega units are on the top of its priority chart as these are expected to better serve its twin objectives of revving up revenue in terms of volume and generation of employment opportunities, the latter being the Congress party›s major poll promise.
The thrust of the government on organized sector is understandable to give immediate boost to the state›s economy. The government is looking at investments by domestic and foreign investors in food processing, MSME, textiles, farm equipment manufacturing, bicycle manufacturing and power etc.
PEPSICO has already committed an additional 600 crore for its ongoing projects.The government has also received investment proposals from the leading players like Godrej, Reliance, Mahindra & Mahindra, ADAG, Britannia, Nerolac, Sanofi, HUL, HDFC and ICICI. Nerolac is in process of setting up of HD Paints in Goindwal.
Going by this ground reality, the beleaguered MSMEs look up to the government for what it may have in store for them. For this all eyes are on the new Punjab industrial policy-2017 as and when it gets unfolded.