State Of The Economy 2012

Growing pains

The shortage of power and labour is pinching large enterprises and killing small players in Tamil Nadu

Photographs by RA Chandroo

Hosur is a five-hour drive from Chennai with fantastic roads for most part of the distance. As you enter the town, you spy a south Indian restaurant comfortably nestled between a McDonald’s and a Café Coffee Day, a definite sign of the times to come. Looking at it now, it’s difficult to believe that back in the 1970s, the central government had  declared the town a backward area. Among the large business houses that accepted sops to set up shop here were Ashok Leyland, TVS Motors, Titan and Carborundum Universal.

Small and medium businesses sprang up close by to support them. “In the late 1970s, we came to Hosur with a lot of dreams and hopes with the money given to us by our parents,” recalls LKM Adhi, managing director of Elkayem Auto Ancillaries, which employs 500 people and reports a turnover of ₹50 crore. Adhi credits Hosur’s growth to co-operation from the government. However, today things are different. “We don’t know who will help us with our problems,” he says. “The government is too busy wooing multinational companies and has no time to spare for us.” 

The source of his unhappiness? Labour and power shortages in Hosur are forcing him to give up business that is coming his way. “The labour shortage happened because of several years of non-governance,” he says. “People have been given so many things free of cost. Add to that NREGA [National Rural Employment Guarantee Act] and people are no longer willing to work. We have lost out on almost 30-35% of revenues this year.” Elkayem’s power and labour costs have doubled to 3-4% and 15% of revenues, respectively, in the past one year. “Where do we make our profits?” asks an irate Adhi. 

Industrial units in Hosur face a daily power cut of nearly 8-10 hours, leading to huge business losses. “Lack of power supply has not merely impacted our business — it has ruined our business,” says PV Venkateswaran, director, Medibest Pharma, a small scale generic pharma manufacturer with revenues of around ₹5 crore. “We can’t plan our production schedule because the power cuts are not scheduled.&rd

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