Steel cluster withers under power shortage

Entrepreneurs in Mandi Gobindgarh blame the state government for not taking concerted steps to support industry.

Mandi Gobindgarh, the steel city of Punjab located on NH-1, 50 km from Ludhiana, is crumbling. Next in importance only to Ludhiana as an industrial centre in the state, the town has been grappling with a severe power shortage for the past few years.

There are over 300 small- and medium-scale units that convert steel scrap (domestic and imported) into a variety of steel inputs like ingots, billets, forging quality ingots, carbon steel and structural steel. The town generates business of Rs 24,000 crore annually and employs more than 1.5 lakh people.

Mandi Gobindgarh, which draws its name from Guru Gobind Singh, flourished industrially for several decades because it enjoyed the status of the largest supplier of different kinds of steel inputs in northern India.

At a time when most industrial clusters in India have been hit by the global meltdown and the slowdown in the Indian economy, the units at Mandi Gobindgarh have lost a substantial amount of business due to power scarcity. Entrepreneurs put the blame squarely on the state government, for not taking concerted steps to support the growth of industry.

“Power is the most important component used in induction furnaces and steel re-rolling mills, accounting for about 50 per cent of the variable cost of production. The growing gap between the demand and supply of power over the years has put the industry in a shambles,” said Ajay Goel of Nabha Steels Limited.

The rapid pace of infrastructure development in the country has created substantial demand for steel, but units in Mandi Gobindgarh are operating below optimal capacity for want of power.

Local industrialists say they get power for 12 hours a day during the kharif and rabi sowing seasons and 18 hrs a day the remainder of the year, with a weekly off-day throughout the year.

Captive power, they said, was not a viable option, as their power consumption was substantial. The steel cluster requires about 800 Mw of power a year, 50 per cent of which is met by state utilities.

“The months of June, July and August were the worst, since we could draw only 40-47 per cent of our requirements,” said Amarjit Goel of Modern Steel.

The industrialists are indignant that the state government offers free power to farmers but has recently increased the tariff payable by industry by 10 per cent. Moreover, the erratic and fluctuating power supply affects the productivity and life span of machinery, they said.

Punjab is the only state in the north that provides free electricity to farmers. The industrialists contended that such freebies encourage misuse of power. The state charges industry Rs 1.20 per unit to cross-subsidise agriculture, which industrialists said pinched them.

Goel said that industry chambers and associations had suggested to the state government that it give power to farmers at a concessional rate rather than free.

Industrial units in Punjab are also required to pay Rs 0.10 per unit as octroi, even though they are located within municipal limits. Industrialists said this was not the case anywhere else in India. However, with power and local taxes (house, tax, entry tax, octroi) taking centre-stage, larger issues like fluctuations in steel prices and restricted movement of labour have taken a back seat.

The state has prepared no roadmap to meet the growing demand for power. Several power projects are hanging fire due to non-availability of coal linkages and reluctance of private players to set up power plants in the state.