#Economic Slowdown: 30-35% Demand Slump, Hundreds of Factories Shut Down in MP

Bhopal: There’s a visible slowdown everywhere in Madhya Pradesh – be it in the economic, political or social spheres.  The reason industrialists and workers offer is demonetisation and hasty implemented of Goods and Services Tax (GST).

Industrialists, their associations and workers across the state claim that all sectors are in the grip of an economic slowdown and there has been a 30-35% drop in demand. Sales, not only in the automobile sector, but in pharmaceuticals, electronics, cement, transportation, textile, electrical appliances, thermal power, among others have declined. 

Such is the impact of the economic slowdown that major industrial zones, such as, Pithampur (close to Indore), Mandideep (close to Bhopal), Govindpura (in Bhopal), Banmore-Malanpur (Gwalior- Bhind), cement plants (in Rewa-Satna) have seen several factories facing a tough time while hundreds of small-scale industries have shut. 

Jamna Auto Industries of Malanpur industrial area claims to have witnessed an 80% drop in demand. JK Tyre has shut its truck tyre manufacturing unit, while the company has reduced the production of small tyres. Various small textiles and automobiles industries in Pithampur are said to be on the verge of bankruptcy. Public sector Bharat Heavy Electrical Limited (BHEL) has also seen a sharp decline in demand for thermal power. Besides reducing the workforce, dozens of small- scale factories have shut down in Mandideep, while various cement manufacturing plants have closed down for some weeks owing to the lack of demand.      

“I have never witnessed such economic slowdown ever before. Some of the companies have witnessed around 40% decline in demand. Owing to this, the companies terminated contract workers, slashed salaries of permanent employees by 10% to 15% with their consent,” said state industries expert and president of Pithampur Industrial Area Association, Gautam Kothari.

The reason behind the slowdown is back-to-back implementation of demonetisation and GST. “Both good moves were implemented without analysing their repercussions and a proper back-up plan to tackle those. A year later, the bad decisions are showing results,” Kothari added.    

Several workers claim they haven’t got salaries since the past three-four months in various factories of Pitahmpur, Mandideep and Malanpur Industrial area. Workers’ associations said because of the slowdown, more than 15,000 people directly (mostly contractual workers) and thousands of people indirectly have lost their jobs. 

Pithampur Industrial Area and Indore

The industrial area is under the Special Economic Zone (SEZ) where more than 850 large, medium and small-scale industries are functional. 

Although the area has a variety of industries, a major chunk of those industries manufacture automobiles textiles and pharmaceuticals.

According to the Pithampura Industrial Area Association, more than 35,000 people directly and around 7,000-8,000 people indirectly work here, but, since the past couple of months, the number of employees has shrunk owing to the slowdown in the market.

“Automobile and textile industries are the worst affected. Manufacturers of auto motor parts have seen 30-35% decline in demand. The big companies have reduced their workforce. Dues of small players are unpaid. While pharmaceuticals companies are yet to be impacted, if the situation doesn’t improve in the next couple of months, those companies too will suffer,” said Kothari.

Requesting anonymity, a textile manufacture said the industry has been witnessing tough competition from Vietnam and Bangladesh. Due to the heavy taxes on transportation and manufacturing, the products are getting costlier than in the pre-GST era. To top it, China which exports products from India, has shifted toward Vietnam and Bangladesh.

Indore is the economic capital of Madhya Pradesh. According to Alok Dave, President of MP Association of Industries, around 350 pharmaceuticals companies have either shut or are facing bankruptcy because of the Union government policies and pressure from the United States Food and Drug Administration (USFDA). 

Electronic industries in Indore are also facing the impact of economic slowdown. “There has been a constant complaint of power cuts to industries since the past eight-nine months, which has added fuel to the fire of our problems,” said Dave.

“At present, we can’t assess the exact loss due to the slowdown in Indore and Pithampura and how many people lost jobs, but major sectors are affected,'' he added.

Mandideep

Mandideep is also a special industrial area, 20 km away from the state capital. Officially, the area has around 755 small, medium and large industries, but less than 300 of these are functional, claimed the Mandideep Industrial Area Association.   

Major companies like Mahindra Steel, HEG limited, Crompton Greaves Procter & Gamble are located in this area.

The industries mainly produce textile, electric equipment, wires and cables, automobiles parts, medicines and so on. More than 30,000 person directly or indirectly work here. The Mandideep Workers’ Association chief Balwant Dagi claimed that more than 6,000 people have lost jobs in last couple of months and more than 50 companies had shut down due to no business in the market.

Ramsiya Garg, who owns a small-scale industry here and manufacture fabrication and planting of mobile towers, claimed that the work order had reduced by 70%.    

“I used to get orders from Idea, Vodafone and other mobile service providers, but, since the past couple of months, these companies have stopped orders citing a slowdown in business,” said Garg.

As the workload had reduced, the owner said he was forced to sack some workers.

Gard claimed there was no business in the market. The companies were not clearing old dues. Banks were not support businessmen, overruling Prime Minister Narendra Modi and Finance Minister’s announcement made in favour of businessmen. “Banks say they follow instructions, but haven’t received any such instructions about the scheme from the head office, hence, were unable to help.” Garg added.

 “The way things are going, I fear, the company’s future is in limbo,” he added. 

Another industrialist, Kamlesh Gupta, who runs factories in four states, narrates a similar ordeal.

Banmore-Malanpur

According to the Madhya Pradesh Industrial Development Corporation (MPIDC), there are 304 registered companies in Malanpur, but only half of these are functional, while Banmore industrial area has 204 companies and over 50 plants are dysfunctional.  

Jamna Auto industries, which is the largest manufacturer of tapered leaf and parabolic springs for commercial vehicle in India, says it has recorded 80% decline in demand. According to officials, who don’t wish to be named, the Malanpur unit used to produce 8,000 tonnes of tapered leaf and parabolic springs every month. This has reduced to 1,600 tonnes per month.

“Due to the sharp decline in demand, the company was forced to cut costs. As a result, it terminated 300 contractual workers in the past three months. While 300 regular workers are intact,” he said.  

More so, JK Tyre has shut its heavy vehicle tyre production unit and has reduced the workforce in the small tyre manufacturing unit. Ashok Kumar Pathak, who supplies labourers to JK Tyre’s plant said, “the unit which needs 700 workers daily, has now reduced to 30 workers a day.”  

Due to slowing demand, Jamuna, JK Tyre and other companies have written to MPIDC to reduced water supply. JK Tyre has reduced its water supply requirement from 50 KL (thousand litres) to 20 KL. “We have received requests from Jamuna, JK Tyre and other reduce the water supply,” MPIDC official Suresh Kumar Sharma confirmed.

Cement Industries

Madhya Pradesh has 13 cement manufacturing plants,. Of  these, nine plants are in Rewa-Satna, where more than 20,000 people work everyday including 3,000 permanent workers. 

Big companies like JayPee, Birla, Prism Johnson have cement plants here.

The General Secretary of Cement Mazdoor Ekta Union, Rakesh Singh, said just like automobile and textile industries, cement is still not in the grip of economic slowdown. “It’s true that the demand is low, but this might be because of heavy monsoon. Construction work stops in monsoon. JayPee Cement has stopped production in two units since the past two weeks. The company hasn’t fired any worker, but they have been getting salary a month late,” he said.      

BHEL - Govindpura

The Bhopal unit of BHEL is one of the most profitable units, but it too is facing a slowdown, as demand for thermal power has reduced.

According to BHEL’s public relations officer, Raghvendra Shukla, the unit has done business of Rs 3,182 crore and its profit before tax was Rs 356 crore in the previous fiscal. The company expects 7-8% growth in the current fiscal, which seems tough to achieve as the slowdown gripped the entire country.

Officially, the company hasn’t fired anyone and its factory is operational in two shifts, but workers claimed that permanent employees were working half day. Two shifts have been reduced to one and contractual employees were working on alternate days. The Bhopal unit has more than 4,000 permanent and 6,000-7,000 contractual employees.

“Owing to the slowdown, the working hours have been trimmed to four-five hours. Contractual employees are working on alternate days,” said Deepak Gupta, a leader of the Indian National Trade Union Congress.