State automobile sector hit by unaccomplished projects

The automobile component manufacturers’ hub, located in and around Ludhiana in Punjab could have immensely benefitted if the proposed projects had materialised.

The internationally acclaimed technology marvel Tata Nano car could have carried ‘Made in Punjab’ tag had Punjab Government been able to freeze the project. Volkswagen, the German automobile behemoth would have set its foothold in Punjab had things fallen in line. The two-wheeler automobile major Hero Group would have made investment in Punjab had they not zeroed in the locations with better comparative advantage.

Volkswagen was offered land in three locations by the Punjab Government. The project at an investment of Rs 1500 crore was aimed at having a manufacuring capacity of 100,000 cars per annum and an annual turnover of Rs 700 crore.

A direct employment for 5000 and indirect employment for 50,000 people was envisaged in the project.

In the segment of automobile sector, Punjab has only three names Mahindra & Mahindra Swaraj Division (erstwile Punjab Tractors Limited), International Tractors Limited (Sonalika Tractors) Hoshiarpur and Swaraj Mazda.

The state has remained untouched by the automobile boom in the country.

“All the automobile manufacturers came with a heavy price tag. Tata asked for a direct subsidy of Rs 1200 crore on an investment of Rs 700 crore. That was unviable. Volkswagen sought a cash subsidy for each car produce. Punjab’s financial condition did not allow the state to go in for such a proposal. Hero Group made some explorations but did not get back to us”, said S C Aggarwal, cheif secretary of Punjab.

Even the personal visit of Ratan Tata with a high powered delegation to Chandigarh to meet the Punjab chief minister could not break the ice.

The autocomponent manufacturers in Ludhiana manufacturered for after market as these were not OEMs (original equipment manufacturers). But they could have graduated to OEMs if the Mother units had established their operations in the state.

Even the International Tractors expanded its operations in Himachal Pradesh to gain from tax brakes offered there.

The Hero Group, that hails from Ludhiana is now manufacturing only bicycles in Ludhiana. Punjab’s loss has been Haryana’s gain and Gurgaon has emerged as an important automobile hub.

Manufacturers like Maruti-Suzuki, Hero Honda, Honda Motorcycle, Yamaha, Suzuki Motorcycles, Escorts have their units in the state.

With a turnover of Rs 30,119.77 crore (2009-10) Maruti Suzuki, Rs 16,096.14 crore (2009-10) Hero Honda and Rs 2189.59 crore (2008-09) Escorts have helped in employment generation and growth.