Amidst the ongoing economic slowdown, more than 24 small industrial units have closed down production in past month in Kanpur, failing to sustain feasible profits post production, due to weakening rupee and increased Value Added Tax (VAT) rates.
The Indian Industries Association (IIA) - Kanpur chapter President Sunil Vaishya said around 2,500 industrial units of the city were facing deep troubles in operation, due to declining orders from abroad.
“The raw materials for automobile component and plastic manufacturing are largely imported from abroad and the weakening rupee has increased the production costs significantly,” he added. The customer’s demand for luxury products has also reduced by half as compared to the same period last year.
The city’s production which was pegged at Rs 6,000 crore per month, has now reduced to Rs 3,000 crore. The production costs have increased by 20 to 25 per cent due to weakening of the rupee. “Surviving in the domestic and the international market under such circumstances is proving difficult for local manufacturers,” said Vaishya.
The production in around 2,500 big and small industrial units of the city has reduced to almost 50 per cent. The machinery components for maintenance of equipment are also not available due to the agitation against increased VAT rates across the state. The major markets of the city’s leather, textile and footwear products are the European countries, which are facing liquidity crunch, hampering the city traders.
R.K Dhawan, Federation of Indian Export Organisation (FIEO) chairman, said due to increased VAT rate, production amounting to about Rs 5,00 crore has suffered in last few days.
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“Normally leather products worth Rs 3,000 crore, engineering products worth Rs 500 crore and textile products worth Rs 300 crore are exported every month, but the figure has slashed to half, for the last two months,” added Dhawan.
Society Motors owner, S.P Agnihotri told Business Standard that the festive sale had dropped to 35 per cent as compared to same period last year. “The customers are not being attracted by discounts and other offers,” he added.