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Vishal Koul

State Of The Economy 2014

Reinforcing Business
In the throes of a much-needed infrastructural facelift, Urla cluster is basking in a general sense of optimism

Vikas Kumar

Molten Strength: 70% of the manufacturing units at Urla are into steel or steel-related products

For nearly 14 years, Manish Bhaiya rode his bike into hell and back, every day. The trek to his rail wagon components factory in Urla from his Raipur home felt like he was travelling into the rural heartland. In fact, the bumpy, kuchcha path that led to his unit in sector B hardly qualified as a road. No wonder he fell down thrice from his motorcycle in a span of two years, breaking a bone each time. “There was no street lights, and I often came across cattle or skidded due to the mud after rains,” recalls the 43-year-old founder of Eastern Fabritech. Repeated requests by him and the Urla Industries Association to the Chhattisgarh Industrial Development Corporation (CSIDC) went unheeded.

After the third fall, in 2011, when he badly hurt his shoulder and hip, “Everyone decided it was time to get a road made,” Bhaiya says, smiling. It’s a small but important victory for Bhaiya and other industrial unit owners in the area, but it came at a price. “I would’ve done much better if things weren’t so bad here,” he rues. Nearby, the upcoming Metal Park is in better shape. “They are creating better infrastructure there.” 

Steel city

Created around 1984-85 when Raipur was part of Madhya Pradesh, Urla on the northern outskirts of the city was the first such industrial area to come up in the region. It was joined in 1992-93 by nearby Siltara, which houses larger industrial units. According to Sunil Kumar Jain, president of the Urla Industries Association, 70% of the units here are into steel or steel-related products. It started out mostly with steel re-rolling mills that worked on scrap from the Bhilai steel plant. With automation, plants that produced 40 tonne a day now have capacities of 500-600 tonne a day. “Since the state of Chhattisgarh was born in 1999, there’s been rapid industrial growth in the region, especially Raipur,” Jain says, adding that Urla now produces more than four times the output of Mandi Gobindgarh in Punjab, once hailed as the steel hub of India. 

Over the years, Urla has found many takers among Kolkata’s business and trading community, which descended here to take advantage of more reliable power. Bhaiya was among them when he relocated to Raipur in 1999 to start manufacture of railway wagon spare parts. “I found the working atmosphere very suitable. At that time, West Bengal was going through a very bad phase. Here, power was always available, which was a crisis in WB.” Now, the ₹5-crore Eastern Fabritech is among two suppliers in Urla of spares for railway goods wagons and coal mine trolleys, such as doors, brake fittings, bolts and roof support systems used in mines. With clients such as the Indian Railways, Western Coalfields, South Eastern Coalfields and Jindal Steel, Bhaiya expects to clock ₹7-8 crore this year. Some of his optimism has to do with his existing order pipeline, but Bhaiya is banking also on private players in coal mining for further growth, when that opens up fully. “We are in the hub of raw materials for our business,” he says, adding that this allows him to bid competitively in government tenders — the route to getting most of his orders. 

If location is a plus, there are also some gaps in the Urla cluster, say local businessmen. There’s no tool room here for making dies, unlike in other clusters such as Indore or Pune. “We use this once or twice a month. If we had a tool room in the cluster, I would have saved on my investment, time and additional labour for this,” says Bhaiya. There is no modern hospital for Urla’s workers, either, although the local industrial association has a small dispensary that can offer first aid. 

The absence of a third-party testing facility is another issue. There’s one at Hirapur, just 7-8 km away, but it’s privately held and the railways doesn’t always accept its reports. “The CSIDC runs only one lab, at Bhilai. Large units have their own testing labs. We get assurances from CSIDC but mostly big industries get heard more than us,” says Bhaiya. Losing employees to larger units is also a common but serious concern. “We lack technical expertise (among workers) and most workers you see were laymen whom we trained. SSI units like ours are really training schools for the larger units,” says Bhaiya, who sees a constant churn in his workforce of 26. 

Better days ahead

Sanjay Agarwal, who runs Raipur Rasayan Udyog in Urla, is also the joint secretary of the Urla Industries Association. His ₹5-crore firm supplies aluminium sulphate used for water treatment and purification in power plants and other industrial units, and in paper manufacture. Among his key customers are thermal power plants. Agarwal expects to grow at 10-15% this year, in line with last year. “Most industries here are steel based. Infrastructure growth has been flat for the past three years and that has affected overall business for us,” he says. 

That situation is improving. Dinesh Agrawal is director at Hira Group, one of the largest homegrown industrial groups of Chhattisgarh, which has businesses in steel and steel products and power generation, with a group turnover of ₹2,500 crore. He is also the chairman of the state chapter of CII. Agrawal says recently the state government instructed the CSIDC to improve Urla’s conditions, and the effect of that is already showing. The approach road to Urla from Raipur that we take is being repaired and redone. Dug up in various places, it’s muddy and extremely bumpy due to the unexpected rains in March and hardly motorable. The relaying of the road has finally happened after years of complaints, says Jain. “The new concrete road should be ready before the target of July,” he says. 

“The government is asking large corporates houses from outside the state to invest. We say, why not ask us?” says Agrawal. Indeed, now that infrastructure is being improved, the overall mood across the cluster is one of positivity. “The government is working on infrastructure now. The chief minister, who is also the FM for the state, has given a positive budget. No new taxes have been imposed on trade,” says Jain. “CST has been reduced to 1% from 2%, which is a major boost.” 

Now, everyone is also hopeful that things will improve after the elections. Unlike other clusters, power is not an issue here and inventory cycles are stable, and several firms have seen capacity utilisation and sales improve in FY14 compared with the previous fiscal. 

Rajesh Agrawal, the head of ₹800-crore structural steel maker Mahamaya Steel Industries, has seen capacity increase at his family business from 70 tonne in 1989 to the current 250 tonne. The company has two sponge iron units in Siltara nearby and Simga around 55 km away. Mahamaya specialises in making high beams, especially the 600 x 210 mm variety. “We are the only ones apart from Bhilai steel plant that make this size,” he says. “Demand for large sections is good and margins are also better.”  

Makeover time

The spanking new Mantralaya at Naya Raipur, 17 km from the old city, reflects the friendly and modern image that third-time elected CM Raman Singh’s government is trying to build for Chhattisgarh. On the fifth floor of Mahanadi Bhawan, N Baijendra Kumar, principal secretary to the CM on housing and environment, commerce and industry, is at the helm of affairs relating to business. The general buzz among industry folks is that he’s very results-oriented, hands-on and minces no words. “Urla and Siltara are not the best models to be followed. These are not great examples of clusters because of historical reasons. Polluting industries come together and produce emissions more than permissible limits,” says Kumar. “The cluster approach may be more useful for non-polluting industries where resources can be shared.”

There is now a shift in focus for the state beyond the traditional industries, Kumar explains. “We also had our share of problems because our industry is based on core sectors like minerals and metals. A conscious decision was taken by our government to not focus on core sectors alone.” Among the new areas are agro products, automotive, tourism, services, IT and concentrating on downstream industries in these. Emphasis is also being laid on integrated townships, and raising the quality and affordability of housing in line with new industrial growth and big ticket investments coming in. “We’ve also initiated major reforms in our integrated township policy. We want good quality townships to come in,” he says. 

Naya Raipur is one such example that is clearly aiming to become a more contemporary and world-class city next to the existing one. “We have instituted a massive skills upgradation programme that is on now. We’re the only state to have a Right to Skills Act, which we are revisiting for 2015 by the end of this year.”

And cluster or no cluster, there’s no favouritism here. Kumar takes a critical view of suggestions that local businessmen should be given a chance instead of inviting big investments from groups and companies outside the state, insisting that as long as people come forward with the right technology and investment capabilities, it’s a level playing field for everyone. “This mentality is sometimes counter-productive. Hathoda leke heera toh nahin bana sakte (you cannot create a diamond with a hammer),” he says in his Malayali accent. “Everybody is welcome.” 

Rather, suggests Kumar, industrial owners must come forward as well and invest in making the area better, and not just depend on government support. “We can facilitate but somebody has to pool in the resources. The Urla and Siltara model hasn’t taken off well. Mostly it’s nobody’s baby. There’s a warranty period for that as well.” On the suggestion for a common hospital, he retorts, “Haven’t they heard of CSR? Why don’t they pool together and set up a hospital under their CSR budgets?”

Future Perfect

Smaller units are doing well in Urla. Ask Jain, who shifted here from Kolkata in 1995 to set up a manufacturing unit. The former trader of copper sheets, flats and rods now makes copper strips and busbars used in electrical products like transformers, switchgears and large electrical panels, all of which are used, he says, whenever a new factory is set up. “Raipur was the ideal location for my plant. The state government had exemptions and deferment schemes on commercial taxes, and there was a 15% capital subsidy to new units,” he says of his decision to move to Raipur. The ₹18-crore Bhomia Copper is a small unit and hardly uses high tech processes but, says Jain, “There are only three other people in India who can make the range of size we make. We can make copper bus bars upto 300 mm width, and we are the only one in Chhattisgarh making it.” 

Jain maintains that the CSIDC should do more for upgradation of basic services. “We give ₹2,800 crore every year as tax to the government. If they spend 1% of that on the infrastructure here, it will make a huge difference,” he says. He explains that lease rent and maintenance is paid every year to CSIDC over and above this. This includes lease rent of 3%, maintenance fees of 3% and street light charges of 1.5% of the value of the land. “At today’s prices of ₹60 lakh/acre, it works out to roughly ₹6-7 crore every year,” he adds. 

In 2007-08, under the national Industrial Infrastructure Upgradation Scheme (IIUS), the public-private partnership model was implemented in Siltara. It worked, admit Urla’s businessmen — the roads there are very good now. But suggestions that Urla adopt the same route aren’t readily accepted. “Unlike Siltara, we are mostly small scale units and cannot spend as much. We are ready to go into PPP but in a phased manner. We suggested this last year but there was no reply,” says Jain. Now, under a new Central government scheme in 2013, the IIUS project will be taken over by the CSIDC, says Jain. No longer a PPP, it will involve the state and Central governments, which will contribute to the scheme. “In the last one year or so, the thinking has changed.” 

Hira Group’s Dinesh Agrawal sums it up. “A sense of well being has come into the community here. People come in from outside and in two or three years they think of making it their home. We are grounded people in Raipur. There’s no attitude problem here.” At least, not when it comes to business.

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