The diesel engine manufacturing industry of Agra provides direct employment to nearly 15,000 people, while indirectly it offers livelihood to about 100,000 local residents. But over the past decade, a number of factors has caused a slow erosion of the industry in the city.
Of these, stringent pollution control norms on diesel generator sets and the recently imposed excessive taxation by the state government are considered to be the primary reasons responsible for the industry’s woes.
According to industry sources, there were about 150 diesel engine manufacturing units in Agra, which produced both diesel pumps and generators by coupling the corresponding pump or alternator to a ‘Lister’ type engine. These engines were noisy and created pollution in the form of sulfurous smoke, carbon, particulates and polycyclic aromatic hydrocarbons, which resulted in a ban on the manufacturing of the diesel generators in Agra, forcing the closure of a number of small-scale units which were manufacturing generators.
Only a few of the generator units managed to obtain technology to make their generators compliant with the new pollution norms, albeit at a very high cost, raising the prices of generators by more than double and bringing them at par, rate-wise, with big players in the business.
Other units which manufactured diesel engines, however, managed to survive through engine-coupled pumpset sales to farmers and irrigation department contracts, while some factories are still assembling old-fashioned generating sets for trusted clients in other states and for export to African countries.
Talking to Business Standard, Rajiv Gupta, former president, National Chamber of Industries and Commerce, Uttar Pradesh, said that in the current scenario, where most of the generator manufacturers were either complying with Central Pollution Control Board norms or had shut down their business, the diesel engines of Agra were facing two primary threats — the entry of LPG- and CNG-based Chinese engines and gensets in the local market, and the rise in taxes to 14.5 per cent on machine tools and accessories.
He said that the entry of Chinese engines in the market could become a serious issue for the local industrialists in the coming years, but at present, the market presence of these engines was insignificant and so far, it had hardly made a dent in the business.
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But this situation could change drastically as despite strong protests by industrialists across the state, the Uttar Pradesh government had brought the machine tools, accessories, etc. in 12.5 per cent slab of VAT. It had also imposed a 2 per cent entry tax on them, resulting in a 10.5 per cent hike in prices making it hard for the indigenous engines and gensets to compete with the cheaper Chinese products.
In protest to the raise, he said, local businessmen had remained on strike for over a fortnight, but the problems reamain unresolved. Consequently, the markets were opened again but the traders were now selling machine tools and accessories on 4 per cent tax, while efforts were being made at state level, to get the tax raise withdrawn.
But if the government did not relent on this demand, the traders could face tax recovery notices worth lakhs from the date of tax-slab change, throwing the industry in deep financial crisis, Gupta added.