The steel town is losing its shine slowly and steadily. The town that has been giving a solid foundation to Punjab's economic growth by generating finished goods and contributing to the state and central taxes, faces a meltdown because of the high input costs and lack of tax benefits coupled with alleged harassment from the central and state taxation officials.
Things have come to such a pass that Devi Dayal Prashar, vice-chairman, Punjab Gau Sewa Board, of the Punjab government, has shifted his industry to Gujarat as he finds the coastal state far better for business. He shifted his four steel re-rolling mills to Gujarat. "If a vice-chairman in the state government is shifting his units to Gujarat, one can imagine the plight of the industry here," said Ashok Kumar, a businessman, who rues lack of tax relief, lack of availability of raw material and higher input costs as major reasons for the meltdown of the industry in the state.
Prashar justifies shifting the business to Gujarat. "In Gujarat, there is Ram Rajya for industry as there is no harassment from taxation officials and the government policies are pro-industry. They give 15% rebate on electricity bill and supply electricity at half the price in case you run the industry at night. Besides, now I save Rs. 5,000 per tonne on freight and taxes that I used to pay to bring raw material in Punjab."
The new industrial policy of Punjab, though very good, had come too late, he said, adding that nearly 40 major business houses had shifted to Gujarat.
Around 50% re-rolling mills and 40% big furnaces in Mandi Gobindgarh have closed down because of one or the reason; the town has around 500 induction furnaces and steel re-rolling mills.
According to a survey conducted by the development commissioner for iron and steel in 1996, Mandi Gobindgarh is the largest cluster of rolling mills in the country accounting for 40% of the total installed capacity and 20% of the total steel production of the country from the re-rolling sector. However, things have changed as in the past 10 years Bhavnagar, Raipur and other places have excelled and now even Himachal Pradesh is giving it a tough competition. Finished steel goods from China also pose a major threat.
"The ground reality is even grimmer. The industry which has survived is also producing only 40% of its installed capacity. The new industrial policy has nothing for the existing units. The government must do something, otherwise migration of steel industry would further increase," said Ashok Kumar, a steel industry expert.
The scene is similar in the induction furnaces of Ludhiana and Jalandhar and in some re-rolling mills in other parts of Punjab.
"It's apathy of the state government which is hurting steel businessmen. We don't want free electricity like the agriculture sector, but the government can provide at least favourable conditions like other states from which we are facing competition. Punjab, no doubt, is an agrarian state, but it can't sit idle on the industry front, which generates taxes for the government. The steel industry is about to die, and only tax benefits, cheap and round-the-clock electricity and end of harassment from taxation officials can make it thrive," said Bharat Bhushan Tony, president, Gobindgarh Steel Chamber of Commerce.
If the government is serious in arresting the migration of steel industry, it should dole out incentives to the existing industry in terms of tax benefits, incentives of production and cheap electricity, said KK Garg, president of Northern Zone Steel Industries.
Punjab-based steelmakers pay VAT of Rs. 600 crore to the state exchequer per annum and provide direct employment to around 50,000 people, industry representatives claimed. Thus, it's time the government paid back the industry by keeping it going, said Mohinder Gupta, president, furnace association, Mandi Gobindgarh.
What industry wants
VAT reduction from 5% to 2%
Cheap electricity or subsidy on electricity
Opening of iron trade with Pakistan
Stop undue harassment from taxation officials
Existing units of induction furnaces in Punjab 200
Working 135 (and that too working on 50% capacity)
Re-rolling mills 400
No of units migrated from Punjab 40
Selling industry for migrating to other states 70
Tax revenue generated Rs. 600 crore
Direct employment 50,000
Indirect employment 5-lakh people