The Hindu Business Line : Kerala manufacturing units having it tough

The New Year began with the news of Tatafone closing down its plant at Kanjikode in Palakkad district. The company had reached an agreement with 162 employees, who had been paid compensation ranging from Rs 3.30 lakh to Rs 5.20 lakh. Most of the workers agreed to invest the compensation in Tata Mutual Fund with an assured return of 12 per cent.

Tatafone, which was set up in 1987 had been incurring loss ever since its inception. According to company sources, the manufacturing cost of a telephone in the unit was Rs 800 as against the cost of Rs 200 for imported sets. Another private sector unit currently on the verge of closure is Indian Aluminium Company Ltd of the Aditya Birla group. The reason for its closure is non-availability of power at affordable tariff.

The State Electricity Board is said to be not permitting the company to draw electricity from the Power Trading Corporation, which had agreed to supply power at Rs 2.50 per unit. The electricity board is insisting on a wheeling charge at Rs 1.60 per unit, making the PTC power costlier.

"We cannot continue for long like this as the idle expenditure is mounting," a senior management source told Business Line. The government, he said, is not taking any interest. If this situation is allowed to continue, the management would have no alternative other than closing down the unit, which was set up in 1943.

In that event, around 1,300 people would be rendered jobless, including 800 regular workers. At the same time, the State Government would be deprived of Rs 80 crore towards power charges and revenue amounting to Rs 25 to Rs 30 crore from various taxes per annum.

Opposition from the environmentalists has shelved the expansion of the Philips Carbon Black Ltd unit at nearby Karimugal. Now the company is understood to have decided to invest around Rs 75 crore for the expansion of its Vadodara plant.

Following an agitation by environmentalists against the alleged emission of carbon black from the unit, the company had closed down the old two lines and set up a third line using the new pulsejet system having a capacity of 39,000 per annum.

This became operational in November 2001, the official said. The capacity of the lines closed down was 42,000 tonnes per annum and in fact, it was planned earlier to enhance the capacity to 69,000 tonnes. The company had invested Rs 7.64 crore in the unit for pollution control measures, but it did not pass muster with the environmentalists, he added.

On the other hand, around 45 State public sector units are in the red and their accumulated losses have crossed Rs 3,500 crore. Many of them require revamping, restructuring and in certain cases closure, an industry source said.

There has not been any improvement in the manufacturing sector in Kerala in recent years. The only area which had shown some improvement of late is the education and health sectors where private investments have come, Mr N. Sreekumar, Chairman, CII (SR) Kerala, told Business Line. He said that despite the concerted efforts to project the State as a conducive destination for investment, the outcome had so far not been encouraging.

"Except in the tourism-related activities, there has not been any revival," said Mr K.P. Padmakumar, Chairman, Federal Bank. He said that in Andhra Pradesh "several unviable PSUs have been disinvested while here they are being kept alive with budgetary support."

The high wage structure and remittances from abroad had made it a high-cost economy. "In fact, in this consumer State, manufacturing activities are virtually nil" and this is the main reason for the low credit-deposit ratio, Mr Padmakumar said.

The tendency and mindset of the people, often politically motivated, is to torpedo anything development-oriented that comes up, he said. If this mindset does not change, "it will soon become a wasteland of opportunities," he cautioned.