 "Land trouble for companies in Gurgaon-Manesar belt")
Labour disputes may have subsided in Haryana's Gurgaon-Manesar industrial belt, but the companies located there have got a different kind of problem to deal with. The state government has asked them to cough up more for land allotted between 2000 and 2003.
The move is in response to direction from the judiciary that the state government should pay five times more compensation for the land it had acquired from farmers in Manesar in 1994. The government, in turn, has asked industries to foot the bill.
There are 1,200 industrial units and each has to pay an additional sum of Rs 1.43 crore an acre for about 900 acres of land they together hold. This is over and above the Rs 1 crore an acre they have already paid. Three months ago, the Haryana State Industrial & Infrastructure Development Corporation (HSIIDC), the state authority responsible for industries, which had earlier demanded additional money for the allocated land, sent out fresh notices asking the units to pay up or face cancellation of the land parcels allotted to them.
The industry is crying foul over the developments, terming this demand as arbitrary and unjustified. The Manesar belt houses companies such as Denso, Mitsubishi Electric Automotive, Subros and Richa Garments, among others.
"We had paid five times more than what the government had paid to farmers. Why are we being made to pay more now? This is in a bad taste," says a leading industrialist who has a unit in the belt.
While conceding the contract signed with the government had a clause saying the companies would have to pay in case of enhancement of compensation to farmers in future, he claims he came to know of it only after getting a notice. "Who knows, the government may invoke the clause in future also. This is endless."
In 1994, the state government had acquired 1,750 acres of land for phase-I of the Manesar industrial cluster. The farmers were paid nearly Rs 4 lakh an acre for the land. HSIIDC developed the area and allotted land to 1,200 industrial units at the rate of Rs 1 crore an acre.
The farmers moved court and their compensation was enhanced to nearly Rs 20 lakh an acre with interest accumulated since 1994. According to IMT Industrial Association, in 2010 HSIIDC paid farmers an additional compensation amount of Rs 1,225 crore, including interest and escalation rates. HSIIDC now wants to collect nearly Rs 1,500 crore from the industry.
"We are acting as per the High Court and the Supreme Court orders. It is the district court, the high court and the Supreme Court that have enhanced the compensation," says Y S Malik, principal secretary to the government of Haryana and one of the three directors at HSIIDC.
"The SC gave the units the option to surrender the land if they found it too expensive. But they are not doing so because the current market price of the land is much higher than the price at which they got it," he says.
According to the original plan, HSIIDC was to allot 55 per cent of the total area for business and the remaining 45 per cent was to be reserved for roads and infrastructure, and green belt.
"We are seeking relief on three counts. First, we were made to pay for 45 per cent of the land reserved for roads and green belt. But the actual land that has been used for roads and green belt is just 35 per cent," says Manoj Tyagi, general-secretary of the IMT Industrial Association. "They should not charge us for 175 acres of land. Second, we should not be charged any interest for the intervening period. And finally, land allotted for different purposes - commercial, industrial, residential and institutional - should be charged differently."
Government officials, however, are of the view that the association cannot complain about the amount charged from different allottees. "We spent the surplus on the development of Manesar. For instance, we spent on the development of the Metro and the Expressway corridor. How else could we generate the money for infrastructure development?" asks a government official.
Maruti Suzuki, which has a unit in phase II and III of the Manesar belt, too, had got a similar notice from HSIIDC last year invoking the same clause, asking it to pay an additional sum of Rs 500 crore for the land allocated to them. The matter is now before the Supreme Court.
In view of similar problems surfacing in the other industrial clusters of the state, Tyagi wants the Haryana government to frame a comprehensive policy that is "fair and transparent" to deal with such cases. Or else business sentiment will plummet.
Battered auto component units see a ray of hope
Relative stability in the rupee-dollar exchange rate helped companies breathe easy as most of the raw materials are imported
It was a quiet weekend at Manesar Club that boasts, among other things, a nine-hole golf course, badminton courts, a swimming pool, conference halls and a restaurant.
Situated at the heart of an industrial hub, Manesar, which houses more than a hundred auto component manufacturing units, the club used to have nearly 300 corporate executives as its members before it closed for renovation some years ago. Although reopened recently, the club is struggling to get new members. The management is hoping to get a deluge of enquiries once industrial activities gain momentum after years of downturn.
Just a few kilometres away, there is a deserted shopping complex, reflecting the gloom that is prevailing in one of the most happening industrial clusters of the country, near Gurgaon in Haryana. Shops have shut down, restaurants hardly get serious business and the volume of banking transactions has dropped.
But the mood is set to change, as members of the $40 billion auto component undustry have begun to see a ray of hope. The sense one gets after talking to a number of manufacturers is that a turnaround is not very far away, if it has not already begun. Several factors are driving the turnaround. Export is clearly a bright spot.
KSS Abhishek Safety Systems that manufactures seat-belts for leading automakers such as Maruti Suzuki and Volkswagen, expects exports to contribute nearly 25 per cent of its total sales in the next financial year. It is quite a change from a situation two years ago when exports constituted just 5 per cent of the company's turnover. "Export is clearly our focus area. Our target is to build a system wherein we will be able to weather domestic slowdown much more effectively by increasing our global footprint," says Dhiraj Dhar Gupta, chairman and managing director.
Companies such as Sona Koyo and Sandhar Technologies too have seen quite a jump in exports. "Twenty five per cent of our sales at Sona Okegawa alone are attributable to exports. We also see a huge potential for trucks and off highway vehicles. Here is where we see exports looking up," says Surinder Kapur, chairman of Sona Koyo, which manufactures steering systems for passenger cars and utility vehicles.
For Sandhar, the makers of locking and vision systems, overseas operations are doing far better than the domestic units, says Jayant Davar, co-chairman and managing director.
Another bright spot has been significant cost reduction. "When the going is good and everything is going up, we do not realise how much froth we are working with. During slowdown we get to know the importance of cost reduction. That is what we have learnt the hard way," says Davar, rather candidly.
A severe cost-cutting drive meant several job losses in the sector. According to authoritative estimates, there have been nearly 250,000 job losses in the auto component sector during this phase of the downturn. The axe fell mainly on contract workers. "Earlier the sector used to have a mix of 90 per cent contract workers and 10 per cent permanent workers. Now the mix is coming round to 50-50," says a top industrialist associated with the sector.
Cost saving has also meant slashing travel expenses by 50 per cent, reduction in power bill by half through energy audits and going for energy efficient systems. "We conducted energy audits at nearly 400 industrial units in Manesar, Faridabad and Gurgaon belt and helped small companies make substantial savings by cutting energy costs," says Rajiv Chawla, president, Faridabad Small Industries Association.
Another positive factor that has helped auto component companies has been the stability in prices of key inputs such as polymers, zinc, aluminium and steel. While the rupee played a spoilsport in the first half of this year, relative stability in the rupee-dollar exchange rate has helped companies breathe easy as most of the raw materials are imported. "Input cost coming down has been a positive for us," says Davar.
However, with commodity prices inching up yet again following signs of global growth recovery, some companies have seen their input cost going up yet again. "Raw material cost has gone up by 15 per cent in the last six months," says Gupta. Kapur of Sona Koyo too shares this view.
The components industry is betting big on interest rate reduction and perceived political stability following forthcoming Lok Sabha elections. The latest inflation reading showing Wholesale Price Index rising less than seven per cent came as a major boost for them. "Interest rate reduction will be a feel good everybody is waiting for. Another positive for us is that the cycle of downturn has run its course and is bound to get over in the second half of this year," argues Davar.
The positives, still few and far between, have followed a long period of sluggish growth with falling margin. Companies are sitting on huge idle capacity, in some cases more than 50 per cent. Even for a big player like Sona Koyo, the capacity utilisation is not more than 65 per cent.
The sector, which registered a negative growth of 7.7 per cent in dollar terms for the financial year ending March 2013, will see a similar situation this financial year, according to executive director of Automotive Component Manufacturers Association, Vinnie Mehta. In the last financial year, export was the only bright spot which grew from $8.8 billion to $9.7 billion. Export is expected to grow 10-15 per cent this financial year too.
The downturn has impacted different players differently. "Those who supply components for tractors are doing very well as tractor sales have gone up by 30 per cent this year. For two-wheelers, this has been a year of marginal growth. But passenger car sales have fallen and component manufacturers relying on this segment has suffered. If you leave aside Honda's Amaze and Ford's Ecosport, the fall in sales of passenger cars is even steeper and component manufacturers have taken a hit as a result," adds Mehta.
Meanwhile, Manesar Club may have to wait for a few more months before corporate executives make a beeline for golf or for using its premises to host global partners.
The move is in response to direction from the judiciary that the state government should pay five times more compensation for the land it had acquired from farmers in Manesar in 1994. The government, in turn, has asked industries to foot the bill.
There are 1,200 industrial units and each has to pay an additional sum of Rs 1.43 crore an acre for about 900 acres of land they together hold. This is over and above the Rs 1 crore an acre they have already paid. Three months ago, the Haryana State Industrial & Infrastructure Development Corporation (HSIIDC), the state authority responsible for industries, which had earlier demanded additional money for the allocated land, sent out fresh notices asking the units to pay up or face cancellation of the land parcels allotted to them.
The industry is crying foul over the developments, terming this demand as arbitrary and unjustified. The Manesar belt houses companies such as Denso, Mitsubishi Electric Automotive, Subros and Richa Garments, among others.
"We had paid five times more than what the government had paid to farmers. Why are we being made to pay more now? This is in a bad taste," says a leading industrialist who has a unit in the belt.
While conceding the contract signed with the government had a clause saying the companies would have to pay in case of enhancement of compensation to farmers in future, he claims he came to know of it only after getting a notice. "Who knows, the government may invoke the clause in future also. This is endless."
* * *
In 1994, the state government had acquired 1,750 acres of land for phase-I of the Manesar industrial cluster. The farmers were paid nearly Rs 4 lakh an acre for the land. HSIIDC developed the area and allotted land to 1,200 industrial units at the rate of Rs 1 crore an acre.
The farmers moved court and their compensation was enhanced to nearly Rs 20 lakh an acre with interest accumulated since 1994. According to IMT Industrial Association, in 2010 HSIIDC paid farmers an additional compensation amount of Rs 1,225 crore, including interest and escalation rates. HSIIDC now wants to collect nearly Rs 1,500 crore from the industry.
"We are acting as per the High Court and the Supreme Court orders. It is the district court, the high court and the Supreme Court that have enhanced the compensation," says Y S Malik, principal secretary to the government of Haryana and one of the three directors at HSIIDC.
"The SC gave the units the option to surrender the land if they found it too expensive. But they are not doing so because the current market price of the land is much higher than the price at which they got it," he says.
* * *
According to the original plan, HSIIDC was to allot 55 per cent of the total area for business and the remaining 45 per cent was to be reserved for roads and infrastructure, and green belt.
"We are seeking relief on three counts. First, we were made to pay for 45 per cent of the land reserved for roads and green belt. But the actual land that has been used for roads and green belt is just 35 per cent," says Manoj Tyagi, general-secretary of the IMT Industrial Association. "They should not charge us for 175 acres of land. Second, we should not be charged any interest for the intervening period. And finally, land allotted for different purposes - commercial, industrial, residential and institutional - should be charged differently."
Government officials, however, are of the view that the association cannot complain about the amount charged from different allottees. "We spent the surplus on the development of Manesar. For instance, we spent on the development of the Metro and the Expressway corridor. How else could we generate the money for infrastructure development?" asks a government official.
Maruti Suzuki, which has a unit in phase II and III of the Manesar belt, too, had got a similar notice from HSIIDC last year invoking the same clause, asking it to pay an additional sum of Rs 500 crore for the land allocated to them. The matter is now before the Supreme Court.
In view of similar problems surfacing in the other industrial clusters of the state, Tyagi wants the Haryana government to frame a comprehensive policy that is "fair and transparent" to deal with such cases. Or else business sentiment will plummet.
Battered auto component units see a ray of hope
Relative stability in the rupee-dollar exchange rate helped companies breathe easy as most of the raw materials are imported
It was a quiet weekend at Manesar Club that boasts, among other things, a nine-hole golf course, badminton courts, a swimming pool, conference halls and a restaurant.
Situated at the heart of an industrial hub, Manesar, which houses more than a hundred auto component manufacturing units, the club used to have nearly 300 corporate executives as its members before it closed for renovation some years ago. Although reopened recently, the club is struggling to get new members. The management is hoping to get a deluge of enquiries once industrial activities gain momentum after years of downturn.
Just a few kilometres away, there is a deserted shopping complex, reflecting the gloom that is prevailing in one of the most happening industrial clusters of the country, near Gurgaon in Haryana. Shops have shut down, restaurants hardly get serious business and the volume of banking transactions has dropped.
But the mood is set to change, as members of the $40 billion auto component undustry have begun to see a ray of hope. The sense one gets after talking to a number of manufacturers is that a turnaround is not very far away, if it has not already begun. Several factors are driving the turnaround. Export is clearly a bright spot.
KSS Abhishek Safety Systems that manufactures seat-belts for leading automakers such as Maruti Suzuki and Volkswagen, expects exports to contribute nearly 25 per cent of its total sales in the next financial year. It is quite a change from a situation two years ago when exports constituted just 5 per cent of the company's turnover. "Export is clearly our focus area. Our target is to build a system wherein we will be able to weather domestic slowdown much more effectively by increasing our global footprint," says Dhiraj Dhar Gupta, chairman and managing director.
Companies such as Sona Koyo and Sandhar Technologies too have seen quite a jump in exports. "Twenty five per cent of our sales at Sona Okegawa alone are attributable to exports. We also see a huge potential for trucks and off highway vehicles. Here is where we see exports looking up," says Surinder Kapur, chairman of Sona Koyo, which manufactures steering systems for passenger cars and utility vehicles.
For Sandhar, the makers of locking and vision systems, overseas operations are doing far better than the domestic units, says Jayant Davar, co-chairman and managing director.
Another bright spot has been significant cost reduction. "When the going is good and everything is going up, we do not realise how much froth we are working with. During slowdown we get to know the importance of cost reduction. That is what we have learnt the hard way," says Davar, rather candidly.
A severe cost-cutting drive meant several job losses in the sector. According to authoritative estimates, there have been nearly 250,000 job losses in the auto component sector during this phase of the downturn. The axe fell mainly on contract workers. "Earlier the sector used to have a mix of 90 per cent contract workers and 10 per cent permanent workers. Now the mix is coming round to 50-50," says a top industrialist associated with the sector.
Cost saving has also meant slashing travel expenses by 50 per cent, reduction in power bill by half through energy audits and going for energy efficient systems. "We conducted energy audits at nearly 400 industrial units in Manesar, Faridabad and Gurgaon belt and helped small companies make substantial savings by cutting energy costs," says Rajiv Chawla, president, Faridabad Small Industries Association.
Another positive factor that has helped auto component companies has been the stability in prices of key inputs such as polymers, zinc, aluminium and steel. While the rupee played a spoilsport in the first half of this year, relative stability in the rupee-dollar exchange rate has helped companies breathe easy as most of the raw materials are imported. "Input cost coming down has been a positive for us," says Davar.
However, with commodity prices inching up yet again following signs of global growth recovery, some companies have seen their input cost going up yet again. "Raw material cost has gone up by 15 per cent in the last six months," says Gupta. Kapur of Sona Koyo too shares this view.
The components industry is betting big on interest rate reduction and perceived political stability following forthcoming Lok Sabha elections. The latest inflation reading showing Wholesale Price Index rising less than seven per cent came as a major boost for them. "Interest rate reduction will be a feel good everybody is waiting for. Another positive for us is that the cycle of downturn has run its course and is bound to get over in the second half of this year," argues Davar.
The positives, still few and far between, have followed a long period of sluggish growth with falling margin. Companies are sitting on huge idle capacity, in some cases more than 50 per cent. Even for a big player like Sona Koyo, the capacity utilisation is not more than 65 per cent.
The sector, which registered a negative growth of 7.7 per cent in dollar terms for the financial year ending March 2013, will see a similar situation this financial year, according to executive director of Automotive Component Manufacturers Association, Vinnie Mehta. In the last financial year, export was the only bright spot which grew from $8.8 billion to $9.7 billion. Export is expected to grow 10-15 per cent this financial year too.
The downturn has impacted different players differently. "Those who supply components for tractors are doing very well as tractor sales have gone up by 30 per cent this year. For two-wheelers, this has been a year of marginal growth. But passenger car sales have fallen and component manufacturers relying on this segment has suffered. If you leave aside Honda's Amaze and Ford's Ecosport, the fall in sales of passenger cars is even steeper and component manufacturers have taken a hit as a result," adds Mehta.
Meanwhile, Manesar Club may have to wait for a few more months before corporate executives make a beeline for golf or for using its premises to host global partners.