One of India’s more prosperous states faces the prospect of turning into an industrial wasteland. The reasons are many
Until the turn of the millennium, Punjab was a highly industrialised state thanks to the many viable commercial ventures that flourished here and provided employment to lakhs of people. However, in the last ten years, the tables have turned and several big industrial houses like Hero, Vardhman, Saluja Steel and ND Garg Group have left Punjab and set up bases in other states.
Aarti Steel has moved to Orissa while the ND Garg Group has made Chhattisgarh its home. Even Avon Cycles is receiving offers from Bihar. Many small industrial units have shifted to nearby Himachal Pradesh. More than 1,500 factories could not start their operations in Punjab as they were not provided with adequate power supply.
RP Singh, general secretary of the Mohali Industrial Association, tells TSI: “The economic health of the state is under threat. A host of industries are moving to other states that are offering incentives. In Punjab, factories are getting neither electricity nor water supply.”
Singh, who owns a paper molding mill, adds: “The roads in industrial areas aren’t good enough. To make matters worse, more and more taxes are being levied. The apathy of the government towards industry has forced 90 percent of the units in Punjab to shift to the nearby Himachal town of Baddi.”
Singh asserts that the industrial environment in other states is infinitely better. “States like Gujarat, Himachal Pradesh and Rajasthan go out of their way to offer land to industrialists. In Punjab, it is almost impossible to acquire even a small piece of land from the government. In the other states, industry is given tax rebates. If Punjab continues with its current policies for five to ten more years, industry would be a thing of the past here,” he adds.
The Punjab government, which blames the Centre for every shortcoming, has been repeatedly saying that Delhi is not giving any industrial package to the state. In contrast, industry is flourishing in some states even though they have not been given any industrial package from the Centre.
In the last eight years, more than 50 big and small companies have shifted their new units to other states. Big companies have invested more than Rs 50,000 crore in other states in the process. Saluja Group has shifted a unit worth Rs 2000 crore to Madhya Pradesh while Vardhman has also moved to the same state. The Trident Group, too, has shifted many units to other states.
Badish Kumar Jindal, president of the Federation of Punjab Small Scale Industries Association, explains why industry is in a shambles in the state. “We use generators when power supply is frequently off. This costs us 12 to 14 rupees more per unit. If we purchase power from outside, it affects the manufacturing costs.”
As roads are in rather bad shape in parts of the state, industrialists are compelled to spend more on the transportation of goods to and from their factories.
“In most places, we have to do without a proper sewage system or drainage mechanism,” says Jindal.
The mounting tax burden is one of the main reasons for Punjab's dwindling industrial stocks. Manufacturing costs in Punjab are 20 to 30 percent more than in the neighbouring states of Himachal Pradesh, Jammu & Kashmir and Uttarakhand. In Punjab, central excise is 10.24 percent, while Himachal and Jammu levy no excise duty.
Punjab-based industry has to pay 2 percent central sales tax while there is no such tax in Himachal and Jammu. Moreover, income tax is imposed in Punjab while industry in other states has to pay nominal income tax.
Chandershekhar, vice president, Punjab unit of CITU, says, “The policies of the state government have all but destroyed industry. Other states are offering cheaper power, state-of-the-art infrastructure and a host of rebates.
Why wouldn’t industrial units shift to these states?”
The CITU leader also alleges that ministers in Punjab are hand in gloves with real estate developers. The latter acquire land for commercial purposes and then use the plots to build residential colonies. “There is probably no minister here who does not have links with estate developers,” Chandershekhar adds.
About the labour crunch facing industry, he says wages are very low in the state. ”There is no labour crunch in Delhi and Ghaziabad. Workers are paid Rs 6,000 a month. In Punjab, the monthly wages are only Rs 4000. The state government has not increased the minimum wages for five years,” he says.
Vinod Thapar, president, Knitwear Club Ludhiana, says, “The textile industry has seen no growth for the last ten years. In Tripura, the annual exports are valued at Rs 18,000 crore while in Ludhiana, which has 14,000 textile units, the figure is merely Rs 9000 crore. Moreover, no special facilities are provided to us by the government. In such a scenario, industrial units are bound to move out to more industry-friendly states.”
Veteran journalist ON Garg says, “The failure of the government lies in the fact that it could not create an industry-friendly environment. There is insecurity in the minds of investors. Both NRIs and big entrepreneurs fear investing in the state. Another reason is that the state has failed to provide required power supply to industrial units.”
As industry flounders in the face of declining investment, the state government merrily spends public money to woo voters by organizing events like the Kabaddi World Cup and hosting glitzy Bollywood shows. How lopsided can a state’s priorities get?
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