OEM orders for Karnataka SMEs dry up

Job losses at small enterprises in and around Bangalore in the last couple of years have totalled 150,000

Until last year, Karnataka was home to nearly 600,000 small-scale units (of which 350,000 are registered), nearly 75 per cent of them located in and around Bangalore, Mysore, Mangalore, Belgaum, Hubli and Shimoga.

But Peenya Industrial Estate in Bangalore, considered the biggest in South East Asia, is on the verge of losing its pre-eminent position. From being an ancillary hub for large industries such as HMT and Mysore Lamps, Peenya today houses big companies such as ABB, Volvo Construction Equipment, Himalaya Drugs, Wipro, NTTF, Jindal, Hitachi, Triveni Engineering and Hindvac, to name a few.

With MNCs coming to Bangalore, small units in Peenya were hoping to benefit. Most engineering companies in Peenya have started supplying components to automobile companies like Toyota, Volvo, Timken, BFW, Bosch and Kennametal India, among others. These units were making profits. But, the orders from automobile original equipment manufacturers (OEMs) have virtually dried up.

The last couple of years have been turbulent for SMEs in and around Bangalore. First, raw material prices plunged sharply; SMEs had produced goods when raw material prices were ruling higher. Buyers were not ready to pay these higher prices and routinely asked for cuts in the prices of finished products. SMEs were unable to cut prices, since this would entail selling at a loss.

Automobile ancillary units are among the major units in Peenya. Most small units in Peenya produce for export, for the automobile sector and public sector units. Their combined annual turnover is over Rs 15,000 crore, of which exports are Rs 6,000 crore.

Most units in and around Bangalore supply components to public sector enterprises in Bangalore, such as Bharat Electronics, Bharat Heavy Electricals, BEML, HMT and HAL. Since the effect of the slowdown started percolating down to small units, almost 150,000 jobs were lost, according to industry representatives.

Delayed payments by large companies for supplies made by small units have hurt a large number of units. Orders from state government departments also dried up.

Innumerable units located in residential areas of Bangalore were also served notices by the Karnataka State Pollution Control Board to relocate. However, they had no other place to go to, since the state government has not developed a new industrial township in the Bangalore region over the past decade.