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Severely setback by demonetisation and the subsequent digitisation, the sector was dealt a massive blow by the GST as it still is largely unorganised and lacks the resources to introduce online accounting, stakeholders of the industry complained.
This, along with rising electricity charges, raw material costs and competition from low-cost Chinese products in the market, put severe stress on the industry that comprises around 6,500 cottage-scale units functioning in the traditional routine of production for six days and selling on the seventh.
To address the immediate needs of the industry, the secretary of the Aligarh Industrial Estate Manufactures Association, Dinesh Chand Varshney, has sent a memorandum to the chief minister, apprising him of the situation.
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“There has been a sudden steep rise in the prices of all raw materials during the past two months but the market is not ready to accept any rise in our finished products,” Vijay Kumar Bajaj, owner of one of the biggest and oldest units here, said.
“The government has a major role in pricing of steel, and it needs to step in with urgent remedial steps,” he pointed out.
Till about 40 years back, this industry was largely running on traditional technology, but as it faced challenges from other countries, specially from China, a number of local manufacturers “adopted the latest technology to compete with the best,” Bajaj noted.
Though he and some others made conscious efforts to stay in tune with the changing times, many had to shut shop as they preferred the traditional methods.
Naseem Ahmad, who ran a successful unit in the Upper Kot area for over four decades, was forced to shut down around three years ago because of new challenges.
Talking about the woes of the industry, Ahmed said, “Most of the old cottage scale units were being run on traditional lines and hardly any paper work. They would manufacture for six days and on the seventh day they would send their goods to nearby Delhi and get cash payments. Thousands of people were surviving through this system.”
“Most of the units were managing somehow, but the COVID-19 pandemic posed a fresh challenge and rendered the final blow,” Ahmed, a former president of the Aligarh Lock Manufactures Association, lamented.
“The first blow was the demonetisation, followed by the so-called digitalisation, which the unorganised entrepreneurs could not cope with. Then came GST, which was a severe blow to the unorganised units that did not have the resources to introduce online accounting,” he added.
A major factor leading to the closure of cottage-scale units is the steep rise in electricity charges in the state, Ahmed said.
“The lockdown last year was somehow overcome by those with a strong financial base, but the current lockdown and the sluggish market are like doomsday,” he added.
State secretary and district president of the Uttar Pradesh State Udyog Vyapaar Mandal Pradeep Ganga said the government should immediately issue orders to the banks for stopping instalments of repayment of all loans till August 31.
“Otherwise it would deal a crippling blow to all those who operate on bank finance,” Ganga said, adding that the Vyapar Mandal has also demanded a special financial package for all units.