H Murali, who runs a small-scale auto ancillary unit in the Ambattur industrial estate, suffered a loss of Rs 4 lakh in one month due to power cuts. He feels helpless as he cannot operate machinery on generator since this would push up the prices.
His customers are unwilling to pay more and he cannot afford to lose them. “The power holiday has almost taken the small-scale industry on the brink of closure,” he rues.
Murali is not alone. Over 1,500 small and medium enterprises (SMEs) manufacturing automobile components and accessories in the estate are bogged down not just by power cuts but also by rising interest rates, slowdown in orders, inflation, and labour shortage.
After experiencing three good years in a row, the Ambattur industrial estate, one of the biggest small scale industrial estates in South Asia, is now passing through difficult times. Established in 1964, it is spread over 1,170 acres and employs over 250,000 people. Last year, its turnover stood at over Rs 4,500 crore.
Most of the units here are major suppliers for both domestic and international brands including TVS, Ashok Leyland, Rane, Tata, Hyundai, Ford and TAFE, says Ambattur Industrial Estate Manufacturers' Association’s (AIEMA) president U Venkatesh.
The prime lending rate, which was 10.5 per cent a year and a half ago, is now 12.5 per cent. Banks, especially public sector, are not forthcoming to lend money to SMEs and manufacturers are unable to seek loans from private banks since they offer at high interest rates, informs NK Nathan, executive committee member.
Moreover, there is also a visible slowdown in the automobile industry, which has forced auto majors to go slow on procurement from here. According to estimates, orders have shrunk 40 per cent as against last year.
While orders from truck makers have declined 45 per cent, from four-wheeler makers this is down 27 per cent. However, demand from two-wheeler companies has picked up by 15 per cent from August this year, as compared with same period last year, according to AIEMA.
Inflation too is adding to the woes. Right from labour costs to raw material and production costs all are heading north. For instance, steel prices increased 60 per cent to Rs 52,000 per tonne from Rs 33,000 a tonne. Steel is a major component and accounts for 55 per cent in an automobile.
With the state currently facing a power shortage, an 8 hour compulsory power cut is being enforced every day, which in turn increases the production cost, since the units have to use diesel to run generators. Power generation through diesel costs Rs 13 per unit as compared with Rs 5 of the state electricity board. Murali’s unit thus has to bear an additional burden of Rs 8 per unit.
Another problem facing the estate over the years is labour shortage. An estimated 10,000 people more are needed in this estate, mostly in the shop floor, says R Sridharan, its vice-president. To tackle this, AIEMA has set up a training centre and tied up with various institutions to train school dropouts.
For Murali and his clan, the problems don’t just seem to end here. Even as they are making efforts to overcome these, there’s a new one taking shape in the form of IT and ITeS companies, which are looking at the Ambattur industrial estate as an alternative to the Old Mahabalipuram Road.
Major companies including HCL Technologies, ICICI OneSource, TCS, Polaris, CSS and Perot Systems have already begun operations in the estate, which has about 20 IT clusters.
