Take the Pathankot highway. Once you hit a road full of potholes, you’ll be on the right track.” As we bounce our way to one of the 10 industrial complexes in Jalandhar City, it is obvious that Satish Wasan wasn’t joking — turn off the Grand Trunk Road, and there seem to be more potholes than road on the 6-km stretch leading to the Sports & Surgical Complex. Granted, most roads in Punjab are a mess, but this one seems particularly bad. “This road has been like this since the India-Pakistan war. We point it out as a landmark when giving directions to people,” says Wasan when we reach his factory.
It’s a few minutes past 10 am but the silence at the complex is almost unnerving. There are rows of buildings that look more like houses than factories and no signboards anywhere — only plot numbers. Armed with explicit directions, we find our way to Wasan Exports easily. In any case, the signs of activity at Plot D-90 would have been a dead giveaway. At the ground floor of the four-storied building, several warmly clad men and women are packing deflated footballs into large cardboard cartons. But before we can step forward for a closer look, Wasan hastily declares, “No photographs, please.” With the football World Cup round the corner, his sports goods company is super busy making and packing consignments of footballs for an international sports brand and confidentiality must be maintained.
Established in 1950 by Wasan’s father, Wasan Exports is one of the oldest companies in Jalandhar, itself the oldest city in Punjab. But it’s far from being the only sporting goods manufacturer in the city. There are over 500 such entities, all in the small scale and cottage industry sector, with a combined turnover of over ₹500 crore. Thanks to the influx of skilled labour from Pakistan during Partition, over the years, Jalandhar has developed as a hub for not only sporting goods companies, but also hand tools, automobile components and surgical goods.
Despite the uptick because of the World Cup, Wasan Exports expects to clock only 10% growth this financial year. Next year, says 80-year-old Wasan, it will be business as usual — back to single-digit growth. “Please don’t mention my turnover — people will be surprised to hear the number, considering we’ve been in business for over six decades,” he says. “We have no ambition to become a sporting goods giant but, at the same time, the government has done hardly anything for businesses in the city to flourish and grow.”
State of apathy
Speak to businessmen across Jalandhar — not just Wasan — and the first and biggest complaint relates to infrastructure — or rather, the lack of it. The road to the complex is a telling example and Wasan adds that the government has done little to develop the area. “Even the service road outside the factory has been built with our money.” The lack of an international airport to cater to the NRI population and industry needs is another sore point. The only international airport in the state is at Amritsar, some 100 km away, and its limited facilities don’t really serve industry’s needs — just about 100 commercial flights take off and land at the airport every week and even its recently opened cargo terminal caters mainly to perishable commodities. “My international clients have to travel eight hours from Delhi through these roads to reach my factory,” Wasan cribs.
He isn’t alone in criticising the infrastructure at Jalandhar. Suresh Rishi, general manager at the ₹25-crore FC Sondhi & Co, another OEM sports goods manufacturer in Jalandhar that specialises in cricket bats and gloves, points to the all-too real risk of losing clients to rivals in other, better connected locations. “I know of clients who land in Delhi and prefer to go and do business in Meerut [70 km from Delhi, in Uttar Pradesh, Meerut is also a sporting goods hub] than travel so long to come here,” he says.
Losing potential clients is only part of the problem. Ensuring timely delivery of orders is also a constant challenge. Over 90% of FC Sondhi’s turnover comes from the export market and depending on road to move goods is just too risky, says Rishi.
Instead, the company relies on rail, sending its products to an inland container terminal at Ludhiana, 60 km from Jalandhar. Ironically, there is a ready inland container terminal at Jalandhar itself, but it is not operational. Officially, nobody comments on why the terminal is lying idle, but off the record, the lack of proper staff and officials is cited as the reason. Meanwhile, “It takes us anywhere from 12-18 days to send a container to Mumbai and, thereafter, another 22 days to send it to the UK,” explains Rishi.
Drive into Jalandhar from Delhi and the national highway is dotted with half-built flyovers — a clear indicator of what ails industrial development in the region. Under the National Highway Development Programme cleared in 2005-06, this was supposed to be transformed into a six- or eight-lane highway. Instead, all that’s visible are incomplete road projects, underpasses and flyovers. “It is the Centre’s responsibility to complete the national highway and make the container terminal operational, not the state’s,” declares Naresh Gujral, Rajya Sabha member of Parliament from the ruling Shiromani Akali Dal. But city roads are no better, a point Gujral concedes. “But the local municipality just doesn’t have the funds for the upkeep of roads,” he defends. The reason, says Gujral, is that until a couple of months ago, there was no property tax in Jalandhar. “Where would the money have come from? Moreover, because of this, Jalandhar could not seek funds from the JNNURM scheme for city development as house tax is a precondition to avail these monies.”
Industry’s infrastructure woes don’t end with roads and airports. Power tariffs in Punjab, already high compared with industrial states such as Gujarat and Andhra Pradesh, have gone up further in the past year, from ₹6.6 per unit to ₹7.3 per unit for industrial customers. “But it is not the state government that fixes power rates, it is the regulator,” points out Gujral. He adds that the power-deficient state has to buy merchant power at ₹9 a unit. “Even at ₹7.3, then, there is an element of subsidy.” But things will improve this year with more than 5,000 MW of fresh capacity expected to come on line. “Then we will be power surplus.”
In December 2013, the Punjab government launched the ambitious ‘Progressive Punjab’ initiative to bring in fresh investment in the state. Industrialists such as Sunil Mittal, Mukesh Ambani and Kiran Mazumdar-Shaw participated in the inaugural event for the initiative, promising to invest in Punjab. But local industry bodies were quick to issue a statement in the press telling the state government that it was fine to attract fresh investments but what was it doing for the existing ones?
“We wanted to draw the government’s attention to local issues that we are facing,” says Balram Kapoor, chairman, CII Jalandhar Zonal Council, who is also joint managing partner of auto component maker JMP Industries. The ₹100-crore company is located in another industrial belt, Focal Point, some 15 km from the Sports & Surgical Complex. The roads here, though, are equally bad, with unpaved service lanes being continuously pounded by the movement of heavy trucks. Inside the large factory compound, a fleet of BMWs is parked at the office entrance. But that’s not a sign that business is booming — far from it. Kapoor says JMP’s growth in the past three or four years has been stagnant. “I’m ready to grow but I’m not being allowed to grow,” he complains.
Despite the slump in the auto sector, there is steady demand for castings, which Kapoor’s firm also makes. Against a nation-wide demand for 1.5 million tonne a year, India produces just 700,000 tonne, while the rest is imported. JMP is a tiny player in this market, producing 1,000 tonne a year. “We have been wanting to double this but it is difficult to raise money, either from banks or through the market,” says Kapoor. “Moreover, where is the room to expand here?”
His grouse: no new industrial zone has been created in Jalandhar in the past three decades. “Do you know that over 100 units have moved from Jalandhar to Himachal Pradesh in the past five years because of poor infrastructure here?” asks Kapoor, adding that he’s considering moving to Gujarat, where he can “save on electricity and freight costs”.
Gujral disagrees that there is no space for industries to expand. “Jalandhar has one of the highest urban densities of population, so there is no room to earmark for new industries within the city, but we have already identified land in nearby Kapurthala,” he points out.
Component manufacturers may be able to shift out of the region, but for some companies, such as those in the hand tool industry, that’s not really an option — Jalandhar is the hub for the ₹1,400-crore hand tools market, accounting for 60% of production of wrenches, wire cutters, pliers, etc. According to Sharad Aggarwal, CEO of the ₹25-crore Oaykay Tools, since 2009, about a third of hand tools companies in the city have shut shop. “All of us have been badly hit by the global recession and slowdown in the economy. First, it was the US economy, then the Eurozone crisis and thereafter big markets such as Syria and Egypt have vanished,” he says. The hand tools market is heavily dependent on exports, so Oaykay, too, has seen virtually no growth since 2009.
Some companies managed to soften the blow from the global downturn by shifting focus to domestic markets. At Raowali in Nurpur, Jalandhar, HB Industries actually invested ₹5 crore in a new manufacturing facility in 2009, its fourth in the city and the third in under a decade. The 38-year-old engineering company manufactures pipe fittings, valves and recently, auto components, and partner Inderjit Singh Maingi points to the “domestic pump” of demand even during the global slowdown. “But things have changed of late as capacity utilisation has not been as per our projections with the domestic market plunging into recession,” he says grimly. Within a year of starting the new unit, the company was sitting on excess capacity, which is when it branched into auto component manufacture. “But now even the automobile line is not doing well.” And as raw material costs rise, the pressure on margins is becoming painful. Maingi points out that the company has rising inventories since traders don’t want to stock goods.
How is the company coping? By making changes on the shopfloor. From working 24x7 on a two-shift basis in 2009, HB Industries is down to an eight-hour schedule. Workers have been trained to work on more than one machine, they are being encouraged to come up with productivity improving suggestions and the company has adopted kaizen techniques, as the prominent signs all over factory show.
It’s still a long way from reaching the targets set a few years earlier. Maingi says he used to make presentations that from being a ₹35-crore company in 2009, HB would be worth ₹100 crore by 2014. “In reality, we are a ₹65-crore company as of last fiscal. And I have stopped making projections.”
People matters are also taking centrestage, all over the state and especially in Jalandhar. Across Punjab, it’s becoming increasingly common to see women on the shopfloor in engineering-manufacturing companies — a direct fallout of growing drug addiction among men in the state. It’s also the reason many factories depend on migrant workers from Bihar, Uttar Pradesh and Himachal Pradesh.
In Jalandhar, the sporting goods manufacturers, in particular, are finding the labour situation a huge challenge. The minimum wage in Punjab has risen to ₹6,248 per month, up by nearly 50% in the past 18 months alone. FC Sondhi’s Rishi points out that this figure is much higher than Meerut’s ₹5,500, which eats into the company’s margins and gives an edge to competition in Meerut.
Then, Wasan points out that as a seasonal business, it doesn’t make sense to keep full-time workers on the rolls all year long. “But if I hire 100 workers, by law I can’t remove staff without government permission,” he adds. Accordingly, he ensures the headcount doesn’t cross 100 and instead makes up the shortfall, when required, by outsourcing work.
And that comes with its own set of problems. Many workers live in rural or semi-urban areas where maintaining cleanliness and quality standards is difficult, if not impossible. “Imagine my client’s reaction if he visits such a house and finds footballs being stitched next to a urinating cow,” he says. Has this ever happened? Wasan isn’t telling, but it perhaps explains why he isn’t sure his grandson will want to continue the family business.