In his 50 years in Ludhiana, Harbans Singh Bhanwer has seen it all.Around 1965, when he began making machine parts in Punjab’s biggest industrial centre, the town was booming. The Green Revolution was underway, and Ludhiana provided a large part of the engineering underpinning for that boom.
Around 1965, when he began making machine parts in Punjab’s biggest industrial centre, the town was booming. The Green Revolution was underway, and Ludhiana provided a large part of the engineering underpinning for that boom.Some units made farm implements while others processed locally grown cotton into yarn and clothes. Companies like Bhanwer’s Craft Tools built the machines these factories ran on. Others operated in manufacturing sectors like cycles, sewing machines and auto parts.
Some units made farm implements while others processed locally grown cotton into yarn and clothes. Companies like Bhanwer’s Craft Tools built the machines these factories ran on. Others operated in manufacturing sectors like cycles, sewing machines and auto parts.
The city—and the now ageing patriarch of a clan that has mostly relocated to Canada—grew together. They saw growth ebb due to bank nationalisation during the emergency years of the early 1970s, and again in the early 1980s due to militancy. Each time, India’s Manchester dusted itself off and got back to the serious business of growing.
Each time, India’s Manchester dusted itself off and got back to the serious business of growing.
By 1991, Ludhiana was exporting to countries in the Gulf and Europe. By 2002-03, Bhanwer’s Craft Tools was selling its products—bearings, castings, hydraulic systems and motors—not only across India, but also in the UAE and Italy.
Over the last decade, however, Craft Tools has seen a steady slide. By 2005, it had lost its international clients. By 2012-13, it had slipped into freefall. That year, the company’s turnover was Rs85 lakh. The next year, it fell to Rs55 lakh. In 2014-15, it was Rs37 lakh. This year, said Bhanwer, “about Rs27-28 lakh” till date.
During the same period, Ludhiana has mirrored this slump. Its biggest companies are moving away. Its smaller units are shutting down.
Take its cotton industry. According to a senior official at Nahar Industrial Enterprises, which manufactures cotton yarn, garments and woollens, the company now makes 40% of its yarn and denim in Madhya Pradesh. Similarly, he said, referring to other industry majors, “All of Vardhman’s expansion is now outside Punjab. And 50% of Trident’s capacity is now in Madhya Pradesh.”
A similar slowdown can be seen in another Ludhiana mainstay—cycles. The town is home to some of the top national cycle brands like Hero and Avon. These companies, too, are expanding not in Punjab, but elsewhere. And between this relocation of the big units and the decision to source more from China, the smaller units, which made a living supplying parts to the big brands, have been hammered.
Things have got especially bad in the last four years, said Amarjit Singh, proprietor of Bhumi Solutions, a real estate company located in Ludhiana’s industrial area. “Only about 40% of the companies here are surviving. Another 30% have sublet their premises to other businesses. And about 30% have shut down.”
Over the last 10 years—and especially since 2010—Punjab has seen a process of deindustrialisation.
None of this is unique to Ludhiana. Over the last 10 years—and especially since 2010—Punjab has seen a process of deindustrialisation.
In Jalandhar, the sports goods industry, which used to export footballs around the world till 20 years ago, has yielded ground to cheaper Chinese products. In the steel town of Mandi Gobindgarh, said DK Mehta, office secretary of the Induction Furnace Association of North India, “We had 300 furnaces three years ago. That is now down to 150, and even those are running at 50% capacity.”
In the holy town of Amritsar, the textile industry has shuttered.
Hasrat Ali, 26, works in a small unit making cycle parts in Ludhiana. His pay is Rs6,000. Over the last four years, the town is seeing numbers of migrant labour fall—another indicator of a slowing economy.
The erosion of industry is one of the major crises facing Punjab. As the number of units shrinks, the state government will struggle to increase its revenues; as revenues dip, Punjab’s already constrained ability to deliver services like education, healthcare and, as the previous story noted, extension services to farmers will decline further.
Industry in a vice
The first reason is the rising cost of operation, which makes Punjab’s industries non-competitive compared to other Indian states, and to China.
Take Jalandhar, once a global hub of sports goods manufacturing. About 70% of what it made was inflatables, the industry term for volleyballs, basketballs, footballs, beach balls and the like. In the run-up to the 1990 FIFA World Cup, said Vipan Mahajan, secretary general of the Sports Goods Manufacturers and Exporters Association, “India and Pakistan supplied footballs to the world.”
The town also manufactured cricket kits, hockey sticks and indoor games. “Jalandhar had a monopoly on boxing gloves. We used to sell them globally.”
That has changed now, with the entry of cheap Chinese-made footballs. “We produce at $2 and they, at $1.50. How do we compete? Today, 90% of the market is theirs.”
The only part of the inflatables market that Jalandhar still operates in, Mahajan said, is synthetic balls for rugby and football—about 10% of the global market.
This has triggered a reorganisation of the industry. Earlier, companies used to get orders for, say, racquets, and outsource production to 5,000 or so smaller units. Now, as bigger companies shut down or start selling imported wares, as is the case with gym equipment, these small feeder units have shut down. I met one man, Mahajan said, who used to make racquets. “He now sells moolis (radish).”
The cycle industry mirrors this sorry story. Big brands such as Hero used to make some parts of a cycle, such as the frame, handlebar, fork, wheel rims and chainwheels, and outsource the rest to smaller units. Here too, said Harinderpal Singh, a managing partner in Birdi Cycle Industries, which makes cycle components like freewheels and chains, a similar set of processes has played out. About eight years ago, Chinese imports began coming in as fully-built cycles and components. As a result, not only have the bigger companies moved a part of their production to other states, they have also switched to Chinese components. About eight years ago, Chinese imports began coming in as fully-built cycles and components.
The declining Allure of Punjab
As cheaper imports came in, companies began looking for ways to survive. At this point, four factors converged.First, with margins under pressure, companies began to question whether Punjab was an optimal location. In an age of globalisation, said PD Sharma, president of Punjab’s Apex Chamber of Commerce and Industry, the state has a structural disadvantage.
First, with margins under pressure, companies began to question whether Punjab was an optimal location. In an age of globalisation, said PD Sharma, president of Punjab’s Apex Chamber of Commerce and Industry, the state has a structural disadvantage.
Punjab Indutry: Punjab shoots itself in the foot
With its once-robust manufacturing industry struggling to compete with rivals elsewhere, Punjab had only one logical option: to reduce the cost of doing business. Instead, to their chagrin, companies found their power and tax rates climbing even higher.Some of the charges are farcical. Punjab, for instance, charges octroi and—wait for it—a cow cess on power. The latter is about 1.4% of the power bill. Apart from this, there is also an electricity duty, and an infrastructure cess, levied on power bills.
Some of the charges are farcical. Punjab, for instance, charges octroi and—wait for it—a cow cess on power. The latter is about 1.4% of the power bill. Apart from this, there is also an electricity duty, and an infrastructure cess, levied on power bills.
“Bijli (electricity) is very costly,” said Bhanwer of Craft Tools. “Rs8 a unit, when other states are charging Rs5. And then there is VAT (value-added tax). It is 6.05% in Punjab—the highest in all India, while it is 3-3.5% in other states. This makes our diesel and petrol costlier, too.”
Punjab Indutry: Why SMEs feel the most pain
An official of Ludhiana’s District Industries Centre, who did not want to be named, has been watching the various processes unfold. While the bigger companies can move out of the state, it is the smaller ones, he pointed out, “jo pis rahi hain (they are being ground down)”.
There are many reasons. For one, both the centre and the state have failed to prepare SMEs for import liberalisation. Mohali is an example.
Today, he makes one machine a month where he once used to make four, each selling for anywhere between Rs1.5 lakh to Rs2 lakh. “We don’t have labour. We are not able to pay more than Rs6,000. Khud kaam kartey hain to nikalta hai (We can make ends meet only if we ourselves do the work).”
Till seven years or so ago, Singh used to make pedals for bicycles. The inflow of cheap Chinese imports caused his business to collapse. When I met him, he was pushing a cycle through Ludhiana’s industrial area. It was laden with myriad repurposed bottles, from two-litre soft drink bottles to more nondescript smaller ones, all filled with Phenyl.
It is a tough life for someone in his mid-fifties. The combined weight of the bottles, he said, would be about 100 litres. Selling them nets him about Rs300-400 in a day. “I work from 7.30 to 2,” he said. “I cannot work longer than that.”
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