More than 115 days after Jammu and Kashmir was stripped of its distinction and statehood, when the businesses were evaluating the losses and exploring a way-out, early snowfall interrupted the economic cycle and multiplied the deficit. As losses are mounting, Kashmir economy will take many years to offset the impact of the twin hits, reports Masood Hussain
Ever since he completed his engineering, Zia Ashaie has remained part of Kashmir’s growth story. Though his father, an orthopaedic, slain during the initial days of the conflict, had introduced the newer Scandinavian technology of staying warm during the chilling winters, it was Zia who took the niche business to the next level and set up an assembly unit for Turkish heaters. This heater helped the civilian population and the army in Jammu and Kashmir to do away with the traditional charcoal, kerosene and wood-fed Bukhari heaters. Now the army is using the same heaters in most of the border belts on Line of Control, the International Border and the Sino Chinese border and the working boundary.
Off late, Ashai joined hands with a US-based accounting software company, the BQE to set up its software development centre in Srinagar. One of the most successful experiments in the IT sector, in the last three years, the company’s highly skilled and very well paid human resource surged from 90 to 140. The homesick IT professionals serving the biggies in Bangalore found the BQE as their major opportunity to be home and stay in the best IT environment.
In late October, Zia was busy supervising construction works in the new 4-floor premises that has come up near the BQE’s Rangreth centre. The IT professionals manning the centre were playing lawn tennis, as there was no work for them. “I had purchased cement and I thought the inclement weather could damage it so I somehow managed workers to consume it,” Zia said. “We do not have any work because we do not have the Internet.”
Zia said neither his entire staff is able to reach the office nor it is actually required to come. “Some professionals are working on certain things and then we fly somebody to Delhi for testing,” Zia said. “There is nothing that we could do, other than waiting for the government to unblock the service.”
After about four months, Zia and his team are back to work. As many as 80 companies were permitted to use broadband after they signed a bond that forbids them from uploading any encrypted file containing any sort of videos or photos; using social media networking, proxies, VPN’s and Wi-Fi. They also have to keep their USB ports disabled on computers having internet. Besides, these companies have surrendered their right to privacy, providing “complete access … as and when required by security agencies.” These bonds were an outcome of the efforts that the stakeholders made to seek the service for the continuation of their businesses.
Unlike many others, Zia said his company decided against shifting the base to Delhi. “It does not suit our operations,” Zia said. “There are no lay-offs, we are still retaining our workers, and we will retain them till it is possible.”
BPO-ISP Hit Hard
Kashmir has not more than a score odd small IT initiatives employing almost 1200-professionals, mostly in the business process outsourcing (BPO). Quite a few of them are in the ‘luxury’ software development or in Internet service providing (ISP). Some of them shifted partially to Bengaluru and Jammu to keep the show going on. But most of the migrations proved highly unsuccessful for various reasons, insiders in the sector said. “One company hired a hall and on the very first night, the landlord cancelled the deal around midnight,” one insider said. “It is interesting how those bearded men managed their night on the streets.”
A small BPO hired a Delhi periphery hall. Once the word spread, they found a lot of bicycle borne youth crowding the entrance because most of the workers were girls.
The government took its own time in understanding the crisis the IT sector was going through. From day one, the players had volunteered to give an undertaking that the service will be for “business purpose only”. Eventually, when the officials agreed to salvage the sector, they still had one major crisis: how to manage the VPN (a virtual private network). VPNs give browsers sort of geographic neutrality and anonymity while officials had their apprehensions.
“We demonstrated to the government officials how we will manage the social media access but told them clearly that blocking VPNs is impossible,” one major ISP said. “When the government got convinced in what we said, two individuals, both locals – one each from STP and NIC, created doubts within the policymakers on the VPN front that delayed a breakthrough after more than two months. Eventually, they also agreed that it was impossible but by then, the process was stalled.”
Srinagar Technology Group (STG), an ISP that gives connectivity to all the major businesses in Kashmir, has laid-off almost thirty per cent of more than 200 people on its rolls. It has other IT related businesses managed by its sister concerns. “Cumulatively, we lost around Rs 4 crore, so far,” one of its executives said. He refused to talk on the record because one of its senior executives was detained by the police for many days “for no reason” in the first week of August.
The August 5, situation led to the literal closure of the Aegis BPO in Rangreth. The broadband closure impacted the commoners: students could not fill forms in time, traders were unable to manage their GST and IT returns. At times, it was a big challenge to manage an air ticket or download a medical diagnosis of a test done outside.
But the IT sector hit is just a part of the huge loss that Kashmir’s economy has suffered in the last 115 days. During summers, Kashmir loses an average of Rs 100 crore a day if, for some reason, people do not work, according to a smart estimation by experts in 2010. That is how the Kashmir Chamber of Commerce and Industry puts the loss at Rs 10,000 crore. Nasir Khan, the Chamber Vice President said the trade body may ask the government to hire a third party for loss assessment and compensate the losses.
Unlike the rest of India, the personal car (PC) market in Kashmir was unfazed by the economic slowdown and was actually growing. It retained its 4000 units a month pace when the sector was showing a downslide in the plains. “We faced a different problem. Between November 2018 and April 2019, the 35 km patch of the Srinagar Jammu national highway was the main crisis as we could not get the stocks,” Irfan Ahmad Narwaroo, the Managing Director of the Jamkash Vehicleads in Srinagar said. “This period saw our sales dipping by around half.”
Irfan heads the PC dealers in Kashmir who jointly employs around 10,000 workers. For slightly more than three months, the sector started picking up the threads. Then came August 5. “In 75 days of the crisis, we sold 150 units when, in last year, we had sold 800,” Irfan regretted. “I employ around 1450 employees. We do not have the policy of laying-off. We retain them all.”
Part of the sales nose-dive was because of the Internet facility. Irfan said everything is on-line and the sector sought a window but the authorities had a different priority. Even the insurance claims are not being processed for lack of Internet facility.
Real estate sector was under intense stress after the demonetisation. Unlike in rest of India, it was attempting a revival when the government advisory asked the non-locals to leave Kashmir. As thousands of workers left Kashmir in panic, the sector was pushed to the worst crisis. In certain cases, the people stopped construction activity.
Shahid Kamili, who runs Kashmir’s only successful steel manufacturing unit had 350 workers managing his furnace and the loading-unloading operations. Most of them left. “We were running with 400 tons per day (tpd) average before the crisis,” Kamili said. “We have resumed operations after a long halt and we barely manage 120 tpd.”
Kamili and many others were forced to resume operations, more by the market forces and less by the government. “The initial 60 days witnessed massive illegal constructions and for this most of the material was sourced from outside Kashmir,” Kamili said.
Movement of goods requires e-billing and it generates through the Internet. As the trade sought a concession under the GST system, the provision was suspended. “It helped the non-local trade. In 10 days, almost 27000 bills were submitted to the GST officials and that will be an interesting story if somebody looks at it closely.”
The crisis led to the capital blockage as retailers, taking advantage of the situation, used our funds to procure the same material from non-local manufacturers, according to Kamili. This built a serious pressure on the local manufacturing facilities to somehow resume. “We were facing a survival crisis and we were being pushed out of the market at our own cost,” Kamili said. “We are regaining the space but now the sector has gone into dormant winter phase.”
“In a year, we have seven months of routine work, we did work for three months after a harsh winter four months of work we have completely lost,” one major cement manufacturer said. “We have resumed but it is for the sake of opening the shop and not doing the business.”
The manufacturer, who wishes to stay anonymous, said the sector must have lost more than Rs 30 crore. “It is a fact that we have not laid-off any staff,” he said, asserting, “It is also a fact that we have not paid them so far because we run low in liquidity.”
Watching the non-local manufacturers supplying cement to Kashmir market, some of the local manufacturers did run their plants during the night for some days during 100 days. However, they faced crippling issues in the dispatches. “For the last 10days, we are selling the cement during morning hours but the fact is that demand is too low,” one sales executive of another manufacturer, said. “Fall of temperature means, we have no demand.”
Artisans In Crisis
When people stay home, traditionally, this abnormality has one great outcome: the handicraft production boosts. At least this was the tradition. “This time, the trend reversed,” said Sheikh Ashiq, the president of Kashmir Chamber of Commerce and Industry, who is also in handicraft exports. “The entire sector now heavily relies on IT, cell phone and other gadgets.”
Kashmir’s heritage handicraft sector that touched a production of Rs 2000 crore in 2013-14, according to Ashiq, was implementing designs that the retailers, exports and stockists would communicate through WhatsApp. “Artisans hugely rely on the telephone for raw material supplies and the designs,” Ashiq said. “The closure of the internet, market and phones proved costly to the sector.”
“There is depression in air and designing is more about passion, how can a designer be creative in such a situation?” asked JyotiMadan, a designer-entrepreneur, who works with Kashmir’s best artisans to create products for up-market chains. “In the hindsight, I do not know how the products will be treated by the buyers in such a situation.”
Owing to the unsustainable remuneration system, demand for machine-made and fake pashmina, the sector was already facing sort of a crisis. Tens of thousands of artisans have migrated to other economic activities already. Unrests have added yet another depressing factor. Trade insiders said while most of the orders for Diwali and Christmas were cancelled in anticipation, the few orders readied during tensions were actually not delivered.
“We are facing another problem that people do not know –blockage of capital in inventory,” one exporter said. “I believe it must be upward of Rs 300-400 crore across the sector in which the trade is unable to manage to sell its stocks.” This is directly impacting the capital circulation in which the artisan is the ultimate sufferer.
Given the aborted tourist season, part of the handicraft retail has moved out for winter to recover part of the loss. Tourism, commercial transport, and the manufacturing sector were the other key sectors that booked massive losses.
Coaching and private tuitions have emerged a major business in the last two decades partly because the parents had started investing in the education of their children and partly because the competitions are getting critical to careers. Apart from the National Eligibility Entrance Test (NEET) and JEE, coaching is seen as crucial for four classes between ninth and the twelfth, all in the science stream. “By an average, the total number of students seeking tuitions for all these classes and the competitions is between 150 and 180 thousand,” Moied Khan, the Kashmir Director of Aakash Institute said. “Then there are drop-outs who go for coaching again and this is how this cycle works.”
Smart estimation puts the resource involvement in coaching at over Rs 600 crore a year in Kashmir. Since August 5, every coaching segment has suffered. Khan, who runs three Aakash Centres’ in Srinagar with an average enrolment of 2500 students, faced a peculiar problem, as his 1000-odd NEET batch had not completed its syllabus. The May 5, NEET examination date is unchanged. “As we were unable to manage the routine here, I hired premises of two engineering colleges in Himachal Pradesh and shifted all of them after a lot of painful counselling of parents especially in case of girl students. This inflated my costs by 200 per cent for renting two spaces for the same batch, one each in Srinagar and Himachal, but the reputation of the institution and the career of the students remain supreme,” Khan said. “They have spent more than 80 days out and will re-join us by early December.” Interestingly, Khan drove as many as 15 cooks from Srinagar to manage his Himachal hostels.
Mansoor Ahmad Matoo, who manages 2800 students in Target PMT’s three branches in Srinagar, said the sector is fighting to stay afloat. “Students paid for the first quarter but hardly were taught for even half the sum because of the situation,” Matoo said. “This was despite the faculty putting in its best efforts but the entire sector is informally being interrupted routinely by the security set-up possibly because the coaching hub at Paraypora is located on crucial airport road.”
Paraypora, considered as Kota of Srinagar, is home to almost 20 centres with cumulative strength of 25000 students, some of whom put up in hostels spread on the airport road. “For the last 20years, the coaching centres and the hostel managers have invested heavily in creating the infrastructure,” Matoo said. “Now the entire sector is fighting to avoid getting into NPAs.”
Education and carrier making, Matoo said, should be seen no less than an emergency service. “We have always held that education should be made politics and conflict neutral,” he said.
With entire business bruised and battered by the lockdown, everybody was looking towards the primary sector, especially the apple. But the fruit was caught in a different crossfire. For the first time, there were voices in the periphery against the harvest and its sale. This was perhaps the outcome of the urban gossip that apple picking marked the conclusion of all the unrest since 2008.
This led the government to throw its hat in the ring. Satya Pal Malik, Kashmir’s last governor got the NAFED for procuring apple. To attract the growers, it triggered a multi-million media blitzkrieg. The central organisation, however, lacked basics and ended up, so far, procuring only a fraction of one per cent of over two million tons of apple that Kashmir routinely produces.
The apple story did not end up with this.No local mundi was operational, this fall. This forced growers to send their produce to outside markets. It was interrupted by a series of attacks killing many non-local drivers. Officials said slightly more than half the produce was moved to outside markets but half is still waiting for transportation.
“Costs went hugely up,” Waseem Ahmad, Shopian growers said. “Lack of non-local labour sky-rocketed the rates and the non-availability of the truckers surged the freight.”
As panicky growers pushed their stuff out, it triggered glut in the market that eventually reduced margins. “Our product was always a buyers’ produce,” regretted Shabir Ahmad, another Shopian grower. “But this time, we sold most of the produce at throwaway costs. In certain cases, the growers barely managed to escape landing in debts.”
Kashmir’s cold storage facility is quite recent. It can retain, slightly more than one lakh tonnes making almost five per cent of the entire production. The rest has to move to the market. Partly, it did and it bled. Controlled Atmosphere Storage (CAS), according to main stakeholders, is full in Lassipora, the main post-harvest hub. “It has not been quite encouraging in north Kashmir,” one of the main players said.
With the growers in harvesting-marketing panic, inclement weather triggered a barrage of heavy wet snow. It triggered a massacre of the orchards. Officials say the losses are more than last year and the on-going assessment will offer an idea of the crisis. “Right now, we are busy in repairing the trees and it is not a small job,” Khursheed Ahmad, a Pulwama villager said. “This is tragic that we will have a lot of fuelwood this year.”
Industrialist Farooq Amin, who has stakes in the fruit and the post-harvest also, said the destruction of the orchards is a loss not less than Rs 5000 crore. “We will have to live with its impact for the next three years,” Farooq said. “I visited the entire periphery and saw the orchards bleeding, everywhere.”
“It was not even in my wildest imaginations,” one player having stakes in pre-harvest and post-harvest apple, “that apple will be caught in the politics of Kashmir.”
One of the few things that have lured poets into Kashmir meadows is saffron, world’s costliest spice. In Kashmir, it is restricted to Pampore and a few belts in Chadoora-Chrar-e-Sharief. The crop has remained in crisis for a very long time for a set of reasons. Urbanisation, land excavations and encroachment have hugely reduced the cropping area –from 5707 hectors in 1997 to around 3785 hectors in 2015. (The Rs 411 crore Saffron Mission project is being implemented on 3715 hectors only.) This has led to the fall in production as Kashmir produced slightly more than 6000 kg in 2018, which is not even one-fourth of the 1990 production.
“Last year was devastated by the dry autumn because the crop requires a drizzle for improvement,” Mushtaq Ahmad, one Pampore grower said. “This year, God was kind and it rained. But quickly the snow started.”
Growers harvest Saffron in turns – the mature flower is harvested first. “We were in the middle of the first turn when it snowed and the crop was literally buried in the first night,” Ahmad said. “Now when it has melted away, the crop is intact but problems are there. I think slightly less than half of the crop is impacted.” Ahmad said the Saffron lands had witnessed a bumper crop this year.
Officials say it is the best crop of the decade but the losses are there, which are being assessed.
Banks In Panic
The situation has turned the banks panicky as they see a lot of slippages in the coming days. “The trade and business are under immense pressure,” manager of one major bank in Srinagar said on the condition of anonymity. “After crises like this, we usually would see the trade and the government negotiating on key challenges and this time it is not happening. The government had on its own written to the RBI – as early as September 10, to extend the 90-days period for borrowings to 180 days but it has not been accepted.”
Right now, the banker said, the accounts are getting downgraded as NPAs on a daily basis. “The banking sector had classified around Rs 600 crore worth of accounts as NPAs in Q2 (ending September) but in the quarter ending December, it will be huge,” the banker said. “Another facet of the crisis is that the businesses which were doing better had started getting dry because the purchasing capacity has gone down. This will add to the overall stress.”
The banking sector was flourishing despite odd. By the end of June 2019, the first quarter analysis suggests that 506 per cent of the deposits worth Rs63391.06 crore were advanced in the state (JK Bank alone having the stake of Rs 41468.63crore). In the three months, the banking sector had added Rs 8289.16 crore to its loan book.
Kashmir, the most fragile economic region in the state, was solely accounting for Rs 33041.43 crore of advances (52.12 per cent of the overall loan book in the erstwhile state). By then the non- performing assets (NPA) had reached a level of 2017.15 crore which is 6.10 per cent, quite higher than the state average of 5.66 per cent. The impact on this might have been massive in last around five months. Its details will be known only when the bankers will meet and discuss.
Frustration In Jammu
With Kashmir closed, the tremors are being held in Jammu as well. In the last 150 years, the Kashmir and Jammu markets have literally integrated. Right now, most of the supplies emanate from Jammu and part of the Kashmir produce sees processing in Jammu.
NeerajAnand, the leader of the Jammu based the Chamber of Traders Federation (CTF) recently talked to media seeking the release of “innocent traders” to restore the confidence of the people. Traders in both the regions, according to Anand “suffered a great loss” since August 5, as the regions are interdependent on each other. “While Jammu supplies the goods to Kashmir valley, the traders from Kashmir also supply fruits like apple and walnut to this part wherefrom it is supplied to other parts of the country,” he said.