While Small and Medium Enterprise (SME) clusters across the country are feeling the heat of the global meltdown, the clusters in Tiruchirappali (Tiruchi) and Ranipet are yet to be affected, thanks to the power sector— one of the few sectors that has not been hit by the slowdown— to which they cater to.
Over 600 units in these two clusters have reported 25-30 per cent growth year on year, and they are optimistic that this will continue over the next five years.
The 328 SME units in and around Tiruchi carry out fabrication jobs for Bharat Heavy Electricals Ltd’s Tiruchi unit, which produces boilers for power projects. They said that in 2008-09 they received orders from BHEL Tiruchi worth Rs 400-500 crore or 2.5 lakh tonnes, an increase of more than 60 per cent over 2007-08.
K G Muralidharan, president of the BHEL Small and Medium Industries Association (BHELSIA), which represents over 280 of the 382 vendors associated with BHEL Tiruchi, told Business Standard that the cluster expects to grow 30 per cent year on year over the next five years. “We are safe in the current slowdown,” he said.
In 2009-10, BHEL Tiruchi is planning to process 4.5 lakh tonnes of steel through these SMEs, which is 50 per cent more than last year, said V Ananthakrishnan, executive director of the BHEL Tiruchi Complex. He that added orders worth Rs 428 crore were placed in 2008-09 and the vendor base would be increased to 500 from 328 during the current fiscal.
M Variavel, secretary of BHELSIA, said that while BHEL Tiruchi is planning invest around Rs 1,200 crore by 2011-12, vendors in and around Tiruchy would invest Rs 200-300 crore during the same period. He noted that in the last two years vendors have invested around Rs 100 crore to import machines that automate welding of boiler support structures and to increase the capacity.
Around 300 SMEs associated with BHEL Ranipet, manufacturer of auxiliaries for boilers, reported 25 per cent growth in 2008-09. A V Krishnan, executive director of BHEL Ranipet, said the unit outsourced 1.10 lakh tonnes in 2008-09, compared to 85,000 tonnes in 2007-08. In 2009-10 around 1.50 lakh tonnes is to be outsourced. In value conversion in 2008-09 it was Rs 120 crore as compared to Rs 100 crore in 2007-08 and in 2009-10 it would go up to about to Rs 180 crore, he noted.
The Ranipet unit, like the Tiruchi unit, is also planning to increase the vendor base by 100-150. Most of the new vendors will be added from other clusters, which have been hit by the slowdown in automobile, leather and textile industries. For instance, SMEs in Hosur, traditionally associated with the automobile industry, have been hit by the slowdown due to the drop in take-up by auto majors from these units. Current capacity utilisation by SMEs is around 20 per cent.
To help these clusters, the Ranipet unit has decided to outsource work to sick units. So far around 64 SMEs from various clusters in the state have taken up jobs from BHEL Ranipet and another 100 are in the pipeline, said Krishnan. The two clusters are currently doing well, but the biggest challenges are power cuts and the lack of manpower.
Last year, SMEs at Tiruchi spent Rs 20-30 crore to buy diesel for their generators. Production has also come down by 20 per cent due to power cuts in the state, said Muralidharan. The power situation has not only affected the SMEs’ revenues, which would have been 20 per cent more, but also the quality, he added.
The other challenge will be manpower. The Tiruchi and Ranipet clusters currently employ some 40,000 people and will require another 5,000 to 7,000 people over the next 12 months. Finding people will be the biggest challenge, said Muralidharan. The association has signed up with various colleges and institutions to train school dropouts and ITIs in welding and fittings, where quality and quantity are lacking.
