Mandi Gobindgarh steel units bet on Jaitley for their revival

Industry in the 'steel city of Punjab' is expecting Union Finance Minister to roll back the excise duty from 12 per cent to 8 per cent

Steel units of Punjab's Mandi Gobindgarh expect the upcoming union budget to have some proposals for the revival of the industrial town.

Mandi Gobindgarh, also known as the 'steel city of Punjab' is losing the business to the steel goods manufacturers in the neighbouring states of Himachal Pradesh, Jammu and Kashmir and Uttarakhand due to tax benefits available in those states.

Steel units in Punjab pay 12 per cent excise duty as compared to tax concessions available to the rivals in the hilly states. A 10 year tax holiday was offered in the hilly states in north from year 2003 to 2013. Those who put up their units prior to 2013 are avilaing the benefits.

The Industry in Mandi Gobindgarh is expecting the Union Finance Minister Arun Jaitley to roll back the excise duty from 12 per cent to 8 per cent to provide a much needed cushion to the ailing industry.

Mandi Gobindgarh is a small town located on NH 1, about 60 kilometres north-west of Chandigarh that houses close to 400 induction furnaces and steel re-rolling mills.

According to Mahinder Gupta, Director, Gian Castings and President of Mandi Gobindgarh Induction Furnace Association, over 200 small units closed down due to unviability.

He added that steel mills are power intensive units and cannot run on captive power. The cost of power in Punjab is Rs 7.38 per unit (Punjab government charges 13 per cent excise on power tariff imposed by the state power utilities). A single furnace needs 2500 kilowatt of power and most of the units have a minimum of two furnaces. High landing cost of power has forced many small firms to close down their operations.

With increasing employment opportunities for unskilled labour in sectors other than manufacturing, the cost of labour has gone through the roof. The avialbility of labour has also been effected due to Mahatma Gandhi National Rural Employment Generation Act (MNREGA) and development projects in states like Madhya Pradesh and Bihar.

The town employs about 1.5 lakh migrant labourers, 50,000 persons from surrounding areas and about the same number in transport sector.

Earlier this year, Punjab government slashed the VAT on steel from 4.95 per cent to 2.75 per cent.

But this did not help to revive the business as expected due to slowdown in demand and high cost of power and labour. The town came to existence in 1940s when the King of Erstwhile Nabha Kingdom provided benefits to the entrepreneurs who put up their steel units.