‘Birmingham’ on the Brink


The government pampers big business, but small and medium enterprises are bleeding in the steel hub of Punjab hit by the slowdown. While thousands of jobless migrant workers starve and wait

Akash Bisht Mandi Gobindgarh (Punjab), Hardnews

Large number of migrant labourers wait at the Ludhiana bus depot for the next bus to Mandi Gobindgarh - the steel hub of Punjab. As one of the bus approaches they climb on top of it and wrap themselves in blankets. Fifty kilometers later, the bus halts at Mandi Gobindgarh. They all get down and ask for directions of a nearby steel mill. While they move they see a group of migrant workers playing cards in a park. They greet and introduce themselves by the name of their district (Sitamarhi in Bihar is where they are all from). They exchange bidis and tobacco and talk about the work scenario in the city.

One of them tells the ‘new batch' that there is a dearth of jobs in the town and they have wasted their money and time by coming here. "All of us are looking for some work but there are hardly any jobs. We have been waiting for a whole week to get one," says an old man rubbing tobacco on his palm. Hearing this, the new arrivals hang their heads in silence. Then they narrate similar stories from Ludhiana - the textile hub of Punjab.

Mandi Gobindgrah is a small city with a large migrant population. It bustles with mammoth trucks carrying steel, iron ore and scrap from the nearby factories. Numerous Vaishno (vegetarian) dhabas and auto workshops dot the city where music from the latest hit, Singh is King, blares out of the speakers. Trucks are parked on both sides of the road and drivers are eating, sleeping and cleaning the trucks. There are few women on the streets, some sell shiny stickers of various gods, actors and actresses, Sikh gurus, to decorate the trucks. Most walls adorn posters of ‘2Much' gold capsules for a heightened sex life: Strength is life, Weakness is death for a man; there are posters of Rab Ne Bana di Jodi all over while rickshaws ferry Sikh men dressed in bright coloured turbans.

This arid town in the backwaters will take you by surprise. Expensive cars roam the streets: BMW, Mercedes, Skoda, etc, try to wriggle out of the small gullies parked with trucks of different shapes and sizes. Amid this entire hustle-bustle and exhibition of prosperity are the frail workers, walking, cycling, carrying huge sacks, sleeping on the pavements, oblivious of the glitz of this small but cash-rich town of Punjab.

The town has nothing striking about it except for the huge steel factories that sprawl all across and make up most of the town. It is because of these industries that the town expanded so much; now it almost touches Khanna town in the neighbourhood. The two look like twin towns.

Back in 1902, Maharaja Hira Singh of Nabha sowed the seeds of industry by starting some industrial units in the town. Then Maharaja Pratap Singh took initiatives for the town's industrial development. Later, Pratap Singh declared it a free trade zone for steel in 1928. The first steel re-rolling mill was established at Gobindgarh in 1940. There are now more than 320 steel re-rolling mills and 65 induction furnaces that are exporting re-rolling steel to various parts of the country and also to some foreign destinations. Due to the large scale extensive steel business, this town is also called the ‘Birmingham of Punjab'.

However, this large scale industrial development has hit a roadblock after the onset of global meltdown in October 2008. Many medium and small scale industries had to shut shops and others are incurring huge losses. The reason: recession in global markets, falling demand in the domestic sector, inadequate power supply, unavailability of raw material and no government subsidies. The trading community is helpless while the migrant population faces starvation and protracted joblessness.

According to industry experts, before the onset of recession, there was huge demand of both skilled and unskilled workers. However, with most units now working way below their capacities, it has spelled doom for these poor labourers who make most of this town's populace. Many have gone back ‘home' to their village, mostly in Bihar, in search for other avenues. Numerous traders and workers narrate similar stories and are finding it difficult to see through these terrible times.

"There is certainly a slowdown in the market. It had started way before. It is difficult to find work even when we have dropped our minimum daily wages. I will wait for a month. If things don't improve, I will go to either to Delhi or Bihar," says Ram Balli from Sitamarhi district of Bihar.

The dwindling prices of scrap -- the main raw material for steel -- have fallen by 50 per cent. This is depreciating the steel industry in Mandi Gobindgarh. "Before October, the price of scrap was Rs 30-32. Now it has come down to Rs 17.50. Because of this, more than 100 scrap stores had to be shut down. There is no availability of scrap as the dealers have hoarded it and are waiting for the prices to revive," says Rajesh Goyal, coal agent. Since September 2008, the global price of scrap has fallen from $500 to $250.

Additionally, before Beijing Olympics, China imported huge quantities of steel. Now they have started exporting the hoarded steel at much lower prices resulting in a global steel slump. "China had exported steel for its various hydropower projects. Once it was done they lowered the price of the leftover steel creating uncertainties in the global markets," points BN Gupta, regional officer, All India Steel Rerollers Association.

Prior to recession, the real estate sector was booming and the demand for steel was at an all time high in north India. Now the demand has hit rock bottom. The automobile sector witnessed a similar fate. Various factories that dealt in automobile parts are witnessing huge losses. "There is no stability in the market. The automobile sector is feeling the heat. We are operating at one-third of our capacity. We supply parts for heavy commercial vehicles to Tata Motors and Ashok Leyland, but they are working at 20 and 40 per cent capacity respectively," informs VK Shahi, general manager (commercial), Modern Industries.

Manufacturers blame the state government for their woes; lack of infrastructure is hurting the steel mills. Power is one issue which unites everyone in this steel hub. They say that with power shortage their cost of production is touching the roof. Gobindgarh also has the disadvantage of being far away from the source of raw materials. Entrepreneurs get more than 16 per cent excise subsidy along with cheap power in states like Himachal Pradesh, Jammu & Kashmir and Uttarakhand. "The cost of production is low in these states, hence most of the new units are mushrooming in these states squeezing our profit margins and survival," laments Raj Jindal, managing partner, Vivek Rerolling mills, Gobindgarh.

Manufacturers claim that the government is willing to bail out only the bigger firms, but since 90 per cent of the units in Gobindgarh fall under small and medium enterprises (SMEs) no attention is being paid to them. "The industry in the town is bleeding. Large numbers of SMEs are facing closure or are already closed. There is no hope of an early revival," says Jindal.

Meanwhile, the workers continue to wait on the streets and pavements to be picked up for work. "With no work we have no option but to head back to our poverty-stricken homes and work in the fields of landlords on low or no wages, and get humiliated and brutalised. I have to feed my three children, so all options are closed," says Shivdas from Gorakhpur .