Haryana automotive ancillaries may lose lands, buildings

Auto ancillaries in Haryana that had been allotted industrial plots under the 'Prestigious Project' category four to five years ago are facing a double whammy. While they are battling the slowdown and have not yet broken even, the Haryana State Infrastructure and Industrial Development Corporation (HSIIDC) has served them with notices requiring them to either make their full committed investments in their projects immediately, or pay a higher cost for the plots allotted to them.

These projects have invested a part of their committed amounts. If they do not invest the remainder, HSIIDC will attach their plots and buildings, and not pay them even half of the amount that they have invested or paid out as interest on loans.

Since the bank borrowing rate is hovering at 14-15 per cent - and loans are provided on the basis of a company's turnover of the previous year - SMEs do not find it viable to invest at this juncture.

"I need to invest Rs 15 crore to save a plot of Rs 2 crore. In the midst of sluggish demand I do not have buyers for the auto components my unit produces," said an entrepreneur.

In view of the increasing demand for automobiles in 2007-08, some young entrepreneurs submitted plans to set up small or medium-scale units to manufacture auto components in Haryana - under the category of 'Prestigious Projects' - involving an investment of Rs 30 crores and above, and were allotted plots of two to three acres each in Bawal, Manesar and other industrial estates of HSIIDC.

The 'Prestigious Projects' category gave them no advantage in terms of pricing of plots or the time for implementation of their projects, or any other incentive. The only difference was that the allotment of plots to this category was not done through HSIIDC advertisements inviting applications for allotment. There was no other incentive or benefit extended to these applicants. Some of the projects were conceived by highly capable young men and women who had worked with multinational companies overseas, but wanted to come back and set up businesses in India.

Once land is allotted by HSIIDC, the time given for project implementation is generally four years. Some of these automotive units were set up in 2011, 2012 and 2013 with part of the total investment envisaged, and commercial production started, as per the corporation's requirements. The auto industry then saw demand falling, inventory piling up and labour unrest in many large, established automobile manufacturing companies in Haryana, all of which has squeezed the small and medium-sized ancillaries.