Good Place For Corporates, But Not For Small-Scale Biz – Times of India – 19-Nov-2014
November 19, 2014 - Uncategorized
In the past three years till May 31, 3,197 small units in Gurgaon have shut shop. Every year, around 1,000 businesses shut down here, an official in the office of deputy excise and taxation commissioner, Gurgaon, said.
Rajan Chaudhary, a small-scale businessman in Gurgaon shut down his packaging business in sector 34 last year because he found the interference by government officials too much for the small unit to handle.
“Every second day, some official would come to my office to find fault in the way my unit functioned. One can either satisfy government officials or run a business. I had no choice but to shut down,” Chaudhary said.
Most small business owners that TOI spoke to said while the city may have nurtured big corporate, it’s a struggle for survival for small-scale units. While some blamed it on interference by government departments, others blamed high realty rates and the crippling blow of enhanced land prices they had to pay retrospectively.
According to section 18 of the old Land Acquisition Act, farmers had the right to move court seeking extra compensation (enhancement) if they felt the government had acquired their land at a price which was lower than the prevailing market rate at that time.
Sandeep Jain (a postgraduate from IIT Kanpur) has been hit hard by this clause. He runs a small factory on a one-acre plot in sector 37, but now says he is thinking of selling his business. The government has asked him to pay an extra Rs 1.8 crore for the land he bought for Rs 89 lakh 10 years ago. He has moved court against this.
Some also said the government sells land at discounted rates to big business while charging small units the market price. “A big auto manufacturer gets land in Manesar at the rate of Rs 19 lakh per acre while we were allotted the same land at the rate of Rs 89 lakh per acre. For us, the breakeven would come much later,” said Manmohan Gaind, who runs a home furnishing business and is also president of small scale businesses’ lobby group called Manesar Industries Welfare Association.
But a senior HSIIDC official clarified that when 500 acres was handed over to the auto major at Rs 19 lakh an acre, there was no infrastructure like roads, green areas and sewage system in place. However, when the land was allotted to other small industrialists after the development of IMT (industrial model township), the additional cost was added to the land price.
You just have to visit Udyog Vihar to get a sense of how small business is being pushed to the margins. Once an industrial hub, it has gradually metamorphosed into a commercial space with most industrial units making way for corporate offices. Consulting firms, stock brokerage houses, big telecom operators, international airlines, e-commerce companies and even hotels thrive where once small-scale units flourished.
“Over 80% of the small businesses have shut down in the past few years and corporate offices have mushroomed in Udyog Vihar that was set up by the state government to promote small udyog or industry,” said Aseem Takyar, a businessman who makes auto parts at Udyog Vihar.
He added that those who have survived, like him, are primarily catering to the big corporate houses in Gurgaon. “Those who make auto parts for Maruti or Hero MotoCorp have survived,” said Takyar.
Many also shut down operations in Gurgaon and moved to nearby towns where land is cheap and the government offered as tax holidays. “Many have shifted to places such as Neem rana (Rajasthan), Bhaddi (Punjab) and Bhiwadi (Rajasthan),” said Takyar.
But a senior government official said the data on small businesses is misleading. “When 3,000 units have shut down in three years, so many new businesses have also opened. Nearly 1,400-1,500 new units open each year in Gurgaon. So, the business has grown in the city,” said a senior official in the department of deputy excise and taxation department.