Shortage of land and labour hobble India?s oldest industrial estate
The Ambattur Industrial Estate, India?s oldest industrial estate set up near Chennai in 1962-63 primarily for small and medium enterprises (SMEs) and tiny units, is grappling with a lost momentum in growth amidst a glut of opportunities.
The estate?s problems mirror the plight of MSMEs in industrial estates across the country.
Members of the Ambattur Industrial Estate Manufacturers? Association (Aiema), the apex body of the industrial estate, point to two major hurdles in their growth: space constraints; and labour shortage.
Space constraints are the results of high real estate prices, service sector firms edging out manufacturers from the estate, and residential colonies cornering every inch of space in and around the estate. The labour shortage has many reasons, foremost being poaching by larger companies, high house rentals in the area, rising living cost and government employment guarantee programmes like the MGNREGA.
Most units are keen to expand their facilities to cater to the rising demand for their products at home and abroad, but are unable to do so. They now want the government to come out with a new industrial estate to facilitate their expansion.
The 2,200-unit-strong industrial estate that has braved the global economic and Asian financial crises in the 80s and 90s and later the global slowdown during 2008-10, apart from domestic problems such as the lack of financing, state and central support and basic infrastructure facilities, now find their growth momentum stalled, ironically, by the region’s economic development.
Once considered to be Asia?s largest for SMEs?and inaugurated by former President R Venkatraman, who was then the Tamil Nadu industries minister?the industrial estate progressed with the entry of TVS group of companies in the early 60s and 70s. The estate spread across nearly 1,500 acres generates an annual revenue of R7,000 crore to R10,000 crore, with an export contribution of around 20%.
The estate employs more than 2,00,000, most of them directly, and houses a diversified set of units like auto components/ancillaries, electrical goods, electronics, garments, leather products, castings, foundries, according to Dilip Kumbhat, managing director of K-Lite Industries and chairman of Chennai Auto Ancillary Industrial Infrastructure Upgradation Company (CAAIIUC), a special purpose vehicle floated by central-state governments with the Aiema under the National Clusters Development Programme, to develop and manage the infrastructure in and around the estate.
?We have had to come across a lot of problems, including of basic infrastructure, financing, demand and logistic facilities. Having withstood all the difficulties over the years, the member companies are ready to expand in a big way given the surge in demand for their products?both on domestic and export fronts?with a combined investment potential of a few thousands of crores, but have to lie low owing to the huge labour shortage and lack of land. With colonies formed around the industrial estate, there is hardly any space for us to expand our operations. Even if we find space, it becomes unaffordable for us as the land prices have skyrocketed?from R60,000 for a 2,400-sq ft plot in the ?60s to R20 lakh in the early 2000s to R1 crore now,? laments Kumbhat.
Ramesh PS, president of Aiema and managing director of Airflow Engineering Pvt Ltd, says, ?The member units are facing a huge labour shortage because of poaching by big companies and multinationals. We hire people in lots, get them trained across various functions to suit individual needs, only to end up losing them to big corporates and MNCs. Schemes such as the MGNREGA too attract people in large numbers and we find it difficult to find good candidates. We invest heavily in training them but they leave us due to better growth opportunities, brand names, perks/wages in larger companies. This puts us in huge hardship, and this is a continuous process There needs to be a level-playing field for us too when it comes to wages. There is a lot of indifference in the existing labour Acts.?
Ramesh also elaborated on the land issue. ?Even if I find some space, the price is exorbitant for us to afford. Prices have skyrocketed due to the mushrooming of service sector industries like software and auto dealerships, which throw a huge price for the same land.?
K Aiyappan, former Aiema president and managing director of Hybrid Auto Cast Ltd, said: ?The estate overcame lot of hurdles over the years, including closure of many units for various reasons. With the forming of CAAIIUC, the industrial estate has undergone a sea-change at all levels, including in roads, power supply, sewage treatment plants, and effluent treatment plants. We have been doing well in the last few years, but cannot cash in on the booming demand in India and in the export market, due to the huge labour shortage. Out of the total workforce of 2.20 lakh, nearly 30% are from other states, particularly from the northern region. With states such as Bihar and Orissa witnessing industrial growth of late, those who have migrated over the years to this industrial estate have been slowly leaving to their native places. This will put us in great trouble, going forward. Moreover, MNCs and big corporates have been poaching on us. It is a serious issue and we have made representations to the concerned authorities in this regard.?
According to him, the house rentals have also gone up sharply in the locality and this is forcing workers in small industries to look out for better opportunities. ?We need the state government to look into this matter seriously and help create enough housing sites at cheaper rates to accommodate those migrant workers in and around our estate?, Aiyappan said.
According to R Sridharan, managing director of Spico Printing Inks Pvt Ltd, ?At least 500 member units are ready to spread the wings but in vain. We are even willing to go to nearby areas, but the prevailing prices are unaffordable to us. We have been in the estate for nearly four decades but there never has been such crises of labour and space. Though the estate was earmarked for SMEs and tiny units, many had closed down and sold the plots to service sector units at higher prices. There is hardly any land available for us to grow despite a huge demand for our products.?
Says a senior member of Aiema, ?Though the units are small, they have major customers in the automobile and electrical industries and even in the export markets. Everyone of us is equipped with the latest technologies and requisite infrastructure. We are confident of growing further despite the many odds, provided the state government came forward and identify for us at least 200 to 500 acres of land nearby. We believe that the units can invest anywhere between R3,000 crore and R5,000 crore in a new industrial estate.?
