As the GST introduced taxing of the industry for the first time in history, the work environment turned upside down, initially in August 2019 and later by Covid-19. In the new situation, the sector had too many costs and no output. Now the manufacturing sector is trying to gradually move out of the red and it is possible only if the government lends some support in managing the stressed accounts, Federation of Chambers of Industry Kashmir’s newly elected president Shahid Kamli tells Syed Samreen
KASHMIR LIFE (KL): A general perception is that the Kashmir based industries are being treated step-motherly. How correct is it?
SHAHID KAMLI (SK): We can’t say that the approach is step-motherly but industries haven’t grown here because of the current security situation. We can’t blame everything on the government, because it has tried its level best in terms of infrastructure development, development of Industrial estates.
But there are many security hassles.
Many industrial estates had been under the occupation of security forces which hampered the entire process, electricity is the main problem which didn’t allow the industry to grow, also the circumstances which reduced the working days. Instead of 365 days in a year, we take only 300 days when we finalise the DPR (detailed project report) of a unit but because the present scenario for the last 10 years, especially 2010 onwards, we haven’t been working for more than 200 days, a year. Post-2016 unrest, we haven’t worked for more than 170 or 180 days. Last year, we didn’t even work for more than 100 days.
This situation has pushed the manufacturing sector into a loss-making enterprise. The losses piled up during lockdown when we had to pay for idle labour. We continued paying the utility charges without any work. When you don’t work, you don’t earn, but even if you don’t earn, you have to pay provident fund, the medical, the rentals of the estates, water charges and all that.
All these funds were drained out from the working capitals. This brought the entire sector under stress.
The frequent unrests led to repeated interruptions and repeated restructuring of our bank accounts. The debts have gone up. These interruptions made the units unviable. When there was a profit component of 10%, the servicing towards the interest instalments and the utility bills had come up to 16%. So it is a loss. WE are facing a situation in which we are paying interest on interest.
The government has to understand that the restructuring has broken the backbone of the industry.
KL: So how you see the growth of the industry in the coming days?
SK: The government has to take certain concrete steps. It has to take in consideration that the abolition of the toll tax has made all units unviable here. Something has to be done to act as a sort of a barrier or provide an edge to the Kashmir industry over the imported products.
We face transport issues. It takes 7-8 days for the raw material to reach Kashmir, from Jammu.
Normally, outside Kashmir, a unit buys the raw material in the morning and manufactures in the evening and the next day, he supplies it. For us, due to the road conditions, it takes us a week to reach because of which the interest instalment on raw material is blocked for six days.
We needed a subsidy which was abolished by the government.
KL: Is not the government helpful?
SK: The government has recently come up with a lot of plans but they’re all still in the air. There is no Industrial policy yet framed. We had 2016 industrial policy, which was suspended. They have yet to come up with a new policy. Unless there is an industrial policy, I won’t be able to comment.
Unless the government comes with a concrete plan, that too taking the stakeholders into confidence, I can’t see anything coming.
KL: So in this situation, how will you encourage aspiring entrepreneurs?
SK: The situation should not prevent people from getting into the sector. It is always good to work for yourself than to work for someone. Yes, it’s a challenging task.
I have seen it myself. I didn’t have a background in business. My family was into civil services but I wanted to do it. I started my business with Rs 80,000 and worked 16 hours a day. If I can do it, anyone can do it.
After I took over as the President of the FCIK, I have instructed my colleagues that we must create some infrastructure for youth, where they can study and choose their careers in the sector. We can have computers where they will work and hunt ideas and opportunities for entrepreneurship.
My goal is to generate youth entrepreneurship in the Valley of Kashmir.
KL: An official report says that 40.82% of the industrial units are currently sick in Kashmir?
SK: We have a plan. Government is giving soft loans for small scale industries. There is a Development Finance Corporation of the Government of India operating in Jammu and Kashmir to support the people and go for the additional line of activity. The issue right now is that the sector is getting negative market vibes. We need a plan to reverse that.
Even the government has instructed the bank to revive the industry. We have to ensure the welfare of the labour including the migrant workers as well.
KL: How will the Rs 1350 crore package announced by the government help the business which claims a loss of over Rs 45000 crore?
SK: It’s just been a couple of days since I have taken over as the President of FCIK.
I had been on the discussion panel when the revival package was being discussed. We have welcomed the package even though our expectations were higher.
But at the same time, we must understand that the Government of India and the Jammu and Kashmir government are under tremendous financial crunch because of Covid-19 triggered growth rate fall. I feel that they have done their part. Moreover, the Lieutenant Governor has said that this is just the beginning.
We had actually asked for compensation for the losses right from August 2019. That was the peak season of the year.
Our working capital got drained by paying interests and instalments up to February 2020. We feel that this particular portion must be addressed. Unless that is not done, no unit can revive.
KL: The debt burden is increasing. How will the repayments impact the industry?
SK: Because of the repeated restructuring of the same account, the liabilities have added up with each added restructuring. Unless and until the government reduces the rates of interest increase the term of loan repayment and give the unit holders ample working capital to work round the clock, the burden will crush the entrepreneur.
KL: The government is luring outside investors. Do you see they wil come given the state of local industry?
SK: I have repeatedly been telling that the government must take local entrepreneurs into consideration. Even investors must work with local entrepreneurs. If they do this, their investment will be safe because they will have a partner in the field exactly as it’s happening in the Gulf. These investments, if any, will be big-ticket investments and that will not impact the small entrepreneurs. In Jammu and Kashmir, the major investments hardly cross Rs 100 crore.
If somebody comes with Rs 1000 crore investment, it is useless to think that it will affect us in any way.
KL: As FCIK president, what are your immediate priorities?
SK: People who voted me to the chair seem to have a lot of expectations from me. Jointly, we will revive the sector and bring the government on board too.
Previously the industry didn’t have any taxes but after GST we pay 18% taxes, which mean the industrial activity is an earning sector, even for the government.
Out of the tax we pay, 9% goes as SGST, so in a way every industry is generating income for the state which means that every industrial unit is a subunit of the state government.
Pre-GST, we had no entry tax, no toll tax, no tax on raw material and the finished stock. Now that we’re paying taxes, the government is taking the money upfront.
That’s why it has to understand that half of the money they’re taking from us should be used in the industry.