Small Fry In Big Soup

EVEN as India remains riveted to the unfolding political scene, a traditional pillar of its economy is crumbling away, unsung, thanks to globalisation. The small-scale industry is dying and, what’s worse, no one’s interested in its revival. In Maharashtra, the most industrialised state, the figures are shocking. Half the 5 lakh small-scale units, yielding a revenue of over Rs 25,000 cro re, have shut shop. Another 25 per cent will do so by next year. Almost 25 lakh workers and their families are out of their primary source of livelihood and another 13 lakh are destined to join them soon. And that’s not a story only of  individual misfortune: the loss of  re- ve n u e to the Centre, state and municipal corporations could be over Rs 5,000 crore a year.

This is by no means a friendly neigh-bourhood recession. The downswing started in ’96 and doesn’t show any letup. Industrial estates and belts are like ghost towns. Where three shifts worked back to back, most units have barely a single shift running and silence descends after 5 in the evening. Says Madhusudan Khambete, owner of an engineering unit in Thane and president of the Thane Small-Scale Indu-stries Association: "We’ve lost all hope. Our members are all shutting down or slowing down business gradually."

It all started, feel manufacturers, with the signing of the W T O and the subsequent gradual reduction of import duties. Indifferent governments also played a part. In India, most of the goods made by the small industry are now on the Open General Licence, freely importable at 5 to 10 per cent duty. The small industry finds this competition impossible to tackle for several reasons:

High duties are also scaring away large industry players from Maharashtra. Voltas, Pfizer, Glaxo and Mukand, among others, are shifting chunks of manufacturing else-where, leaving just shells behind— the law doesn’t permit them to close completely. Since over 90 per cent of small industry are suppliers to large manufacturers, they’re going out of business.

But isn’t that what globalisation is supposed to do? Benefit the consumers by creating a business environment that ensures superior quality of goods at reasonable prices? The small industry agrees on the quality question but laments that it could compete but for the high costs which are not under its control. Kulkarni says that his relays were 20 to 35 per cent cheaper than imports until a few years back and offered a guarantee of seven years. "I could tackle the competition from bigwigs like G E C   Alsthom , Siemens and A B B," he reminisces. Khambete ’s Rs 50-crore Aplab was giving products f rom Hewlett-Packard a run for their money till the import duties were lowered. Now H-P can sell the same goods 15 to 20 per cent cheaper. Rues Khambete: "We are pitted against big sharks whose advertising budgets are 10 times our turnover. "

And the state hasn’t cooperated. On the contrary, it stopped industrial expansion in the Mumbai Metropolitan Region in ’84. Then the small industry in Thane and Kalyan-Ambernath argued that to reduce costs, it needed to have economies of scale. The government interpreted this in its own unique way. It allowed these units to expand and build on their plots, but no extra electricity or water consumption. After a bitter fight, in June ’98 the non-polluting  units were allowed to expand. The papers reached them only in February ’99, eight months after the decision.

The small industry is now despondent as repeated pleas to the industry ministry and the state government have yielded little response. "The government simply hikes taxes to make up for the revenue loss owing to closure of units," says Kulkarni. "Maha-rashtra was conducive to manufacturing because of factors like skilled labour, an attractive tax structure and a steady, inexpensive power supply," says Khambete, "all of which stands annulled today." Other states like Andhra Pradesh and Tamil Nadu have become more attractive.

Even such comparative advantages may  be temporary because of the implications of the W T O agreement. The  condition of the small-scale industry in Maharashtra is just a window to a countrywide trend. Khambete and his ilk are still looking for an elusive level playing field, even though deep inside they believe that the multinationals will eventually squeeze the local industry out and establish their own monopoly in different markets. "The government has to rationalise duties and streamline other factors forus to become competitive. Else, local industry will be wiped out and India could become a nation of traders," says Patel. Adds Soparkar: "Look at white goods and consumables. Once led by local  brands, they have been mostly replaced by global brands."

Will the newly-elected governments at the Centre or states think about the plight of the small industry? They’d better. In  Maharashtra, at least, the industry is no longer in a mood for sops or compromises. It wants the country’s support. And now.