The Hindu Business Line : Sriperumbudur: A boomtown beckons

With a host of companies descending on Sriperumbudur to set up a spectrum of units, the once sleepy town near Chennai is transforming in a hurry. The changes most visible are in its socio-economic structure, with land value soaring over night and, more importantly, the local people getting paying jobs. For the companies, the draws are the proximity to a port, good infrastructure and availability of quality manpower, though as more and more units are set up, labour availability is becoming an issue. R. RAVIKUMAR and VINAY KAMATH survey the HR scene in the boomtown. "We are transporting all our workers, and the further afield we have to go the more expensive it will become. In a competitive business, every small increase will have serious c

At the gates to prosperity... SIPCOT Industrial Park at Sriperumbudur, near Chennai. - Bijoy Ghosh

You know that there will be several new crorepatis on the block when you hear the figures roll effortlessly off the tongue of Elizabeth Selvaraj, Panchayat Board President, Irungattukottai, a village near Chennai. An acre, she says, which sold for a mere Rs 10,000 ten years ago, now sells for a whopping Rs 2 crore in an 8-10 km radius of this village. This village, abutting Sriperumbudur in Kancheepuram district, till a few years ago was known only for its international auto racing track, but has emerged as the new manufacturing hub in Tamil Nadu, a process triggered by car-maker Hyundai Motors which set up its factory in this barren stretch of land along the Chennai-Bangalore highway in 1996.

As Ms Elizabeth, herself sitting on a fortune with the extended family owning 40 acres, avers: "The Sub-Registrar office here is perhaps the busiest one in the district." There are over 50 panchayats in this new industrial belt and all of them are seeing a host of new industries descending on them to acquire land for new projects, the latest of them being Samsung India and Dell Inc.

Spin-off effects

The employment opportunities that these factories have thrown up have had spin-off effects. Most households in this belt have at least one two-wheeler. "If you take Irungattukottai, our village, for example, there are about 2,300 people, with around 1,400 below the age of 40. Today, all of them are employed in Hyundai — either directly or through contract outfits — and its vendor companies, and each is earning a minimum of Rs 120 a day," says Ms Elizabeth. In fact, the village is now bustling with activity so much so that even "panchayat board meetings are held only on Sundays and not on weekdays as most of them are employed."

With more and more companies, several of them multinationals, showing keen interest in setting up their manufacturing facilities, Sriperumbudur is witnessing a lot of changes in its socio-economic structure. Locals claim that the cost of living has gone up and rents as well.

However, what could emerge as a concern as the industrial belt grows is manpower shortage. As it is, all major manufacturers there are bringing in people from different locations around Sriperumbudur, including from the weavers' township of Kancheepuram.

With Samsung India signing a pact with the Tamil Nadu Government to set up its second manufacturing facility in the country at Sriperumbudur, and Dell to follow suit with its own facility, the belt now has different types of industries from automobile to glass and electronics to garment units.

Locational advantage

While Mr Ravinder Zutshi, Deputy Managing Director, Samsung India Electronics, announced that the company chose this belt for its second plant due to its proximity to the port, good infrastructure and more importantly, availability of high quality manpower, more such units would only scale up the demand for skilled and semi-skilled manpower.

"The Sriperumbudur industrial belt will definitely see a severe shortage of manpower, both skilled and semi-skilled, in another two to three years," says Mr G. S. Ramesh, Senior Vice-President, Hyundai Motors India Ltd, which could well be described as the pioneer in this belt, having set up shop first. By the end of 2009, total number of employees in the belt, including those of ancillary units of these companies, is expected to cross a lakh.

Mr G. S. Ramesh, Senior Vice-President, Hyundai Motors India Ltd

Mr V. Rajgopal, Chairman, Celebrity Fashions, which recently invested Rs 20 crore for a trouser-making facility, the first such in the area, says labour could become an issue as other garment units come up. Says he: "Currently we are transporting all our workers, and the further afield we have to bring them from the more expensive it will become. In a business as competitive as garment manufacturing, every small increase will have serious consequences. We will have to wait and see how this pans out; for now we are training raw hands and hoping that, having gained the skills, they will not leave us for another plant for a few more rupees."

Attrition rates

According to industry sources, the entry-level salary for a diploma holder in the belt varies between Rs 42,000 to Rs 85,000 per annum depending on the nature of industry. Many auto component industries adopt a low-cost approach such as apprenticeships, or fixed-term engagements. It is also felt that the attrition rate in these companies may go up over a period. Companies may lose people to other manufacturers in the belt whose skill-set requirement is the same.

"The attrition rate has been higher during the last year. This will certainly be a challenge in the coming months for manufacturing industries in and around Sriperumbudur. A recent survey on the skills gap in Tamil Nadu also shows a deficit of skills across all sectors," says Mr P. Padmakumar, Team Leader (HR), Saint-Gobain Glass India.

Mr P. Padmakumar, Team Leader (HR), Saint-Gobain Glass

According to him, this would certainly reflect in Chennai, where the mobility potential across sectors is also quite high. There are inter-changeable skills within the companies that are coming up at Sriperumbudur. "Compensation management is a challenge," he says.

The skill-sets that are required, he says, are manufacturing support skills, welding, operating of utilities and machinery, machining, lathe operation and such tasks. In that context, for Sriperumbudur as a manufacturing destination, the supply of people within a radius of 10 km is very limited.

Though Hyundai reports a 13 per cent attrition in recent years, according to Mr Ramesh, Hyundai Motors, being the first in the region, had the first-mover advantage. "Apart from that, as the skills set required for us is different from the ones required by other manufacturers in the belt, the attrition at Hyundai is very low. There are not many who have left us in the last 10 years," he says. And, nor did the company poach labour from other auto majors as the technology was new to the country. "The employability of people from other auto majors was almost remote as our technology was very different. We had to recruit people and train them in our technology and then employ them," he says.

Preference to locals

In 1996, Hyundai Motors bought over 500 acres in the area, including some farmland. So, the company had to give preference to the locals in employment. "When we started recruiting people for the new facility, the availability of employable manpower was very low and we did not have much choice. But, today it is other way round. We insist on at least an ITI certificate to be absorbed at the induction level," says Mr Ramesh.

As Ms Elizabeth, the Irungattukottai panchayat president, says, there are only 30-40 ITI diploma holders in her village. "These days, the companies such as Hyundai, Nokia and Foxcon insist on at least an ITI diploma. For example, Hyundai Motors is ready to absorb any number of ITI-educated people our village can produce." As Mr Ramesh explains, "We gave priority to those who sold us their land. We picked up those boys who had done their X Standard and encouraged them to study in ITIs in and around Sriperumbudur at our expense and trained them in our factory and later employed them."

Glass-maker Saint-Gobain, which has a big manufacturing facility in the belt, too believes in encouraging employment for local residents. "We have employed people from the vicinity. However, given the technology that is deployed at Saint-Gobain Glass India and the nature of products, we find there is dearth of skills in the local vicinity for diploma holders," says Mr Padmakumar.

Samsung too plans to give priority to local people in employment. "We will be looking at recruiting people from Sriperumbudur and its adjacent areas, subject of course, to them meeting our competency criteria," says Mr Sanjay Bali, GM-HR, Samsung India. According to him the company does not foresee any issues as far as operator/technician level (entry-level) recruitments are concerned. "We will recruit and train these people in our facility," he says.

Saint-Gobain's Padmakumar says the company too has a scholarship scheme for encouraging more students from the local community to pursue a diploma in engineering as a career option.

Employability issues

In addition to this, Saint-Gobain Glass India claims to believe in a policy of `employability vis-a-vis employment'. In this initiative, it works with an external agency for training outsourced service provider's workmen.

Structured training programmes lasting for two to three weeks are designed by Saint-Gobain Glass India focusing on safety, industrial discipline, hygiene, industrial working/ behaviour, developing related skill sets and handling of safety critical products.

"This has been the commitment of Saint-Gobain Glass India to society. We see more relevance for similar skill-building initiatives with corporate partnership in order to meet the specific and emerging demand for skilled and semi-skilled people," says Mr Padmakumar. Mr Bimal Rath, Head of HR, Asia-Pacific, Nokia, says that over time the pool of employable people will increase. "There is no shortage of `raw' talent but more investment needs to go in refining them, both by industry as well as by the government."

He says that increasingly people are moving from other parts of TN to this belt but the facilities and environment still fall short.

The industries that are now setting up or have set up their base in and around Sriperumbudur are major employment generating ones.

Among the newer ones are Nokia, Motorola, Flextronics and Samsung, among others. These companies have huge requirements for entry-level and skillable people.

For example, as Samsung's Zutshi says the company's proposed Rs 450-crore new facility will directly employ about 2,500 people and indirectly another 1,500 when fully operational. The figure does not include people required for the likely ancillary units in the complex that Samsung is set to bring along.

Saint-Gobain also sees a shortage of manpower in the years to come. "There is a dearth of skilled personnel since the polytechnics and vocational training institute are not fully equipped to meet the demand. The buoyancy in all the sectors, including manufacturing is providing opportunities for mobility across sectors. For example, there are diploma holders in software companies doing CAD, similar profile in telecom companies working in revenue assurance," says Saint-Gobain's Padmakumar.

Along with this growth there have been other developments of significance: The concept of contract labour is undergoing substantial change with the emergence of outsourced service providers (OSPs). "OSPs are major companies and many have an annual turnover of over Rs 30-40 crore. They have their full-fledged management teams at each of their sites. They provide the best of safety and personal protective equipment to their employees and higher insurance coverage than the statutes claim. They have a huge skill pool and they deploy based on requirement at various sites," explains Mr Padmakumar. According to him, the earlier concept of affinity to one location and one place of work no more exist. "There are many choices for the employees of OSPs," he emphasises.

With the number of employees in the belt all set to cross one lakh in another few years, do the companies see any labour problems? Companies aver that there is none such at the moment. They say the awareness at all levels is quite high not only with regard to the rights but also on the responsibilities.

Trade unionism

"Nowadays, each person in the factory premises is conscious about his/her role with regard to cost, quality, productivity and safety," says Mr Padmakumar of Saint Gobain.

According to him, the onus is on the companies not only to attract and retain talent at all levels but also deploy large-scale skill building initiatives. "We see equal or more role and challenge for the trade union in these skill-building initiatives especially in the manufacturing sector where the presence of trade unions is more. In this changing scenario, we see no room for labour militancy," he says.

Hyundai's Mr Ramesh also rules out any room for labour militancy saying, "Since we offer a good atmosphere for our employees to work in, we see no such issue in the belt." Endorsing his views, Mr Bali of Samsung says, "With companies like us going in for more proactive employee relations and taking good care of our employees in terms of the work environment and the facilities that we extend, we do not expect trade unionism to be a threat."

The upside of the growth in this belt, say observers, is that with more high-tech companies such as Nokia, Motorola, Dell, Flextronics and Samsung setting up their units, the employability of women is set to go up as assembling units globally use women more for their dexterous hands. Nokia's employee mix, for instance, has about 70 per cent women as they do better in the finger dexterity test, required for fine assembly work.

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