Costly power resulting in MSME flight from UP

60 units in Western UP surrender power connection

In the backdrop of rising energy costs in Uttar Pradesh (UP), the beleaguered Micro, Small and Medium Enterprises (MSME) sector continues to face an existential crisis, which is also resulting in flight of industry to the neighbouring states.

Recently, the UP Electricity Regulatory Commission (UPERC) had announced power tariff hike by almost 4% for the MSMEs, while the tariffs for the large and heavy industries were not raised.

Currently, the average cost of energy supplied to MSMEs in UP stands at almost Rs 10 per unit compared to Rs 6 per unit about five years back, Indian Industries Association (IIA) Lucknow Chapter chairman Surya Prakash Havelia told Business Standard on Wednesday.

He claimed almost 60 industrial units in Bijnore, Muzaffarnagar, Meerut and Ghaziabad districts had already shut and surrendered their electricity connection totalling 158 Megawatt (Mw) in recent months due to steep energy costs and consequent unviable businesses.

Most of these units have already migrated to the neighbouring states, where power is both abundant and cheaper, he added.

“Power is the primary requirement of any industry and if the electricity is costly, the price competitiveness is not there and the unit cannot survive,” Havelia said.

UP is home to almost 4.4 million MSMEs both registered and unregistered. The sector is the second largest employment generator after agriculture in UP.

The Akhilesh Yadav government had recently announced UP Information Technology & Start-up Policy 2016, which was aimed at facilitating small and large IT/ ITeS industry spanning startups and MSMEs by providing incentives and a conducive policy framework.

However, the IIA maintained that nothing had changed on the ground and the industry continued to face challenges related to availability of industrial land, power, labour issues, cheaper finance etc.

“The condition of MSMEs has only deteriorated over the last 4-5 years under the current dispensation as the new policies have not been implemented. There is also utter lack of coordination between the various government departments and authorities,” IIA Lucknow Chapter secretary Awadhesh Kumar Agrawal said.

The MSME sector is estimated contributing 60% to the state’s annual industrial output, employing 40 million people and generating economic activity worth Rs 1,20,000 crore annually. It contributes 50% to the Gross State Domestic Product (GSDP) in UP.