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High costs drive SMEs from Mumbai

June 11, 2005 11:25 IST
Mumbai may be a dream city for most Indians, but for small and medium enterprises still scattered across the city, doing business here can be a nightmare. More so if you are in manufacturing.

"The cost of doing business here is extremely high. From real estate and labour to transport, water and electricity, we pay a premium," said Srikant Chaphekar, director Priya Engineering. Chaphekar is setting up his new factory near Pune.

"Real estate and labour are cheaper in Pune and I will save on transport since my clients will be closer." He supplies windscreen motors and windscreen wipers to automobile majors like Bajaj and Mahindra and Mahindra.

Sanjiev Kaushik, another automobile ancillary supplier who moved his factory from Dombivili in Mumbai to Nashik 10 years ago, preferred the hassles of negotiating bad road and rail connectivity to staying on in the city.

"I can factor in the delay in my shipments. But I save on real estate and labour costs to the tune of 15-20 per cent." It is a major saving for small and medium enterprises.

SME owners in the city point out that as result of rising costs, nearly 70-80 per cent of the units in areas like Marol, Dombivili-Ambernath and Thane's Wagle Estate have closed down.

Said Chaphekar, "The heavy costs of services in the city, combined with 5 per cent octroi and other duties and the rising of cost of living, are pushing manufacturing industries out of the city."

In Marol, their place is being taken by IT and ITES companies which are now changing its skyline with steel and glass structures.

Said VM Vaidya, a consultant to several of the SMEs in the area, "The government's policy of encouraging IT and ITES companies has resulted in the defunct or less profitable units selling out to developers and moving out of the city."

Thane's Wagle Estate has a similar story to tell. Once the proud hub of first-generation entrepreneurs, now nearly 70 per cent of the units have closed down.

Said Sitaram Shah, president of the Thane Manufacturers' Association, "A lot of units here were doing job work for others in Mumbai and Pune. When octroi and property taxes were hiked in 1999, they could not compete with others suppliers who had less taxes. We manufacture in Thane but to get it to Mumbai, a few kilometres away, we have to pay octroi.

"What is killing industry here is the divided market — with a unified market for Mumbai, Navi Mumbai and Thane we would at least have a chance of survival." Other issues include militant labour unions and frequent disruption of power supply.

Pointed out Rangnathan Seshan, secretary Thane Belapur Manufacturer' s Association, "With frequent power disruption, the units suffer as furnaces cool down, or in the food processing units entire batches are lost due to tripping."

The result, said Seshan, is that most owners who lost business have sold out their units and moved into trading.

Losing ground

  • Rising costs have resulted in 70-80 per cent units in Marol, Dombivili-Ambernath and Thane's Wagle Estate shutting shop.
  • IT and ITES companies are now changing the skyline.
  • A lot of units here were doing job work for others in Mumbai and Pune.
  • Other issues include militant labour unions and frequent disruption of power supply.
Gayatri Ramanathan
Source: source
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