Rising prices of raw material, cheap imports from China coupled with labour shortage have hit the hand tools, steel, auto parts and nut bolts industry in Punjab.
Worst hit are nearly 200 hand tool industrial units in the state where sales have dipped by 30% while cost of production has increased on rising steel prices and non-availability of power.
Most of these hand tool units are engaged in the manufacture of spanners, pliers, screw drivers, ranches and tool kits. In 2006-07, sales turnover of these units was Rs 372 crore, which dipped to just Rs 51.43 crore in 2009-10.
President of Apex Chamber of Commerce and Industry, P D Sharma told FE the spurt in steel prices during the last few months would further make these units unviable. Recently, a two-member Punjab Government?s Resource Mobilisation Committee had decided to impose additional VAT in lieu of octroi and increase in VAT from 4 to 5% in addition to entry tax which has not gone well with industrialists.
While the government aims to fetch revenue of Rs 4,000 crore from it, industrialists say they would be burdened with additional taxes as already the industry is reeling under power and labour crisis, Sharma added.
General-secretary of Industrial Development Council, Karandeep Singh Kairon said, ?China-made products are cheap and people prefer buying the same. On the other hand, we cannot decrease our prices as cost of production is becoming very high due to a rise in steel prices, labour shortage, increase in VAT rate and disrupted power supply.? He said labour shortage had its genesis in recent incidents of violence involving migrant labour from Bihar and UP. He said few labourers who turn up demand almost double the wage.
?Earlier, we used to pay Rs 1,500-2,000 to one worker, now they are demanding Rs 3,000 for the same job,? he said.
Kairon said increase in steel prices was working against small units as the Steel Authority of India had increased the prices of steel by Rs 2,500 per tonne while the Rashtriya Ispat Nigam Ltd increased the same by Rs 4,000 per tonne during the last one month. The raw material supplier gives rebate on the purchase of high volume of raw material, but since small units do not have huge purchasing power they fail to get any rebate. He alleged that a cartel formed by the steel companies was constantly raising prices thus adversely affecting the small-sector units.
Chairman of Chandigarh-based Modern Steels, Amarjit Goyal said such a sharp hike was totally unjustified and was making business totally unviable. Goyal said ?Our unit caters to the automobile, defence and railway sector, where contracts are signed on a long-term basis. So, we cannot pass on the hike to them and are forced to absorb the hike in raw material, thus shrinking our margins.?