Punjab foundries move to Chhattisgarh

Amarjit Singh of Mithila Malleables Private Limited, had a flourishing steel business near Steel City at North Mandigobindgarh for over three decades, but the changing business scenario in the past five years persuaded him to relocate his business and he zeroed in on Raipur, capital of Chhattisgarh.

Amarjit Singh is not an isolated case, but there are a few who relocated and expanded their operations in other states of India either closer to the source of raw material (Chhattisgarh) or in tax holiday state (Himachal Pradesh).

Squeezing profits due to high power tariffs coupled with the withdrawal of freight subsidy hit the cluster of steel re-rolling, induction furnaces and forging units a few years back.

But the tax concessions offered in the neighbouring states of Himachal Pradesh, Jammu and Kashmir and Uttarakhand by the Government of India in 2003 was the last straw on the camel's back.

Many small units shifted to Himachal Pradesh, but others, with an eye on future expansion, relocated and expanded in Raipur.

J P Sharma, former president of Mandi Gobindgarh Chamber of Steel and director of R K Steel and Alloys told Business Standard, that business in Punjab became un-viable after the suspension of subsidies. Sharma, last year, put up his unit at Raipur, where he makes H R Strip and tubes.

Mandi Gobindgarh was developed in year 1940 as a steel city by the Maharaja of Nabha. The ruler of the erstwhile kingdom declared the area as a tax free zone to promote industry in the region.

For about four decades, Mandi Gobindgarh remained an important steel centre for the entire north.

Though, it always had the disadvantage of being at a distance from the source of raw material, the industry flourished due to the various kinds of subsidies like freight equilisation and quota on rolling material by the government of India.

The town had a cluster of about 200 re-rolling mills and 40 induction furnaces. The frequent revision of power tariff by the Punjab government was another factor that undermined the profits, as power was one of the input used in processing of steel scrap.

Sharma told that the Chhattisgarh government offered an interest subsidy of up to Rs 5 lakh for the new units. The power tariff in Chhattisgarh is about Rs 2.80 per unit as compared to Rs 4.10 in Punjab.

Anush Chaudhary, of Punjab Forging and Casting Limited, is more comfortable with his new set-up at Raipur in the name of Shri Shyam Iron and Power Limited. Chaudhary said that there was no red-tapesim in Chhattisgarh and its location gave an incentive to grow in future.

Avtar Singh of Mithila Malleable said that the place is conducive for both forward and backward linkages.

The company, Mithila Malleables, relocated as A.S. Mechanical group has invested about Rs 15 cr in new facility, the first phase of that was commissioned about four months back. Singh told that their company recently supplied 85 tonne casting to Tata and Welspun manufactured at the Raipur unit.