Tamil Nadu industrial estates lose business

Struggle with rising raw material costs, and power and labour shortages.

Faced with power shortages, interest rate hikes and non-availability of labour, the two major industrial estates in Chennai – Guindy and Ambattur – have lost business worth over Rs 1,000 crore, according to representatives from the two estates, who said survival has become a question now.

The Guindy Industrial Estate, set up in 1956, is one of the oldest industrial estates in the country. Now administered by the Tamil Nadu Small Industries Development Corporation (SIDCO), it has virtually become a neglected adjunct of the much bigger, better developed SIDCO Industrial Estate.

The estate, which was set up for automotive and engineering activities, is now losing out to other industries, including information technology and other service sectors.

K V Kanakambaram, president of the Industrial Estate Manufacturers’ Association, said, at present, engineering and automotive units contribute only 30 per cent of the Guindy estate’s total turnover, down from 100 per cent five or six years ago.

“In the coming years, it will only come down, as people have started leaving the estate, since staying in the business is not viable.”

There are about 120 automotive and engineering units in the estate, employing around 5,000 people. There are also some 2,000 micro units, which take on job work from the units in the estate. All these units combined did business of about Rs 1,000 crore last year.

“We could have easily grown further, given the number of domestic and foreign manufacturers, especially from the automobile sector, that have set up their base in and around Chennai. But we couldn’t because of raw material costs, and power and labour shortages.”

Kanakambaram estimated that last year alone the estate must have lost business to the tune of Rs 500 crore because of these factors.

“Our margins are around 10-15 per cent, but on the other hand raw material costs alone are going up by 10 per cent every year, which the customers (OEMs) are not ready to accept,” he said

Secondly, he said, customers are delaying payment, which in turn affects the units’ ability to pay the banks in time.

He noted that if the units in the estate don’t pay interest to the banks in three months, then the loans would be declared NPAs and access to further loans would be restricted. “We end up going to private money lenders.” He said that MNCs were getting loans at lower rates of interest than SMEs.

While the scheduled power cut in the estate is two hours, the unscheduled cut is around three hours. This brought down production by 50 per cent.

“We are not able to deliver our orders on time, since the machines are idle and running the units on generators is impossible, given the increase in fuel cost,” said S Srinivasan, who runs a fabric unit in the estate.

The 1,430-acre Ambattur Industrial Estate, which houses around 1,500 units, is also facing the same issues, added R Selvaraj, president of the Ambattur Industrial Estate Manufacturers Association (AIEMA). AIEMA, formed in 1963, has around 800 members.

Almost 60 per cent of the units in the estate cater to the automobile industry and the turnover of these units is an estimated Rs 2,000 crore per year.

“The power shortage of around four hours a day has resulted in a productivity loss of 40 per cent for industries here. Growth is stagnant due to power shortages and other issues,” Selvaraj said. The industrial area was recording a growth of around 20-40 per cent earlier.

Both estates are facing severe labour shortage. It is estimated that around 5,000 employees would be required for the Guindy units alone. “We are not able to get workers from any part of Tamil Nadu, thanks to the Government’s freebies and other social welfare schemes,” said Kanakambaram.

Both estates now depend on Bihar and other eastern states for migrant workers. The labour cost is estimated at Rs 250-300 per day and manufacturers are also finding it difficult to manage accommodation for the migrant workers, due to the higher rental rates and hesitancy of house- owners to accommodate bachelors.

In the Ambattur estate there are around two lakh employees, of which 30 per cent are women. “Almost 40 per cent of the employees are migrant workers. Where can we accommodate them?” asked Selvaraj. “Retaining employees is the key to the success of each unit in the estate now,” he added.