SEZs are a colossal loss to the exchequer

Autocar Pro News DeskBy Autocar Pro News Desk calendar 28 Feb 2007 Views icon2355 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
SEZs are a colossal loss to the exchequer
In the last decade, segments within the Indian bearing industry have evolved and clearly warrant greater attention. For instance, we have slowly started becoming a centre of excellence in 2-3 areas. One is in turning of bearing rings and in making brass cages and rollers. It is time the government recognises this learning curve and start creating centres of excellence. Typically in China, you will find one village that makes trillions of zips while another makes trillions of buckles and yet another makes trillions of cups only!

Because of the levels of scalability established, it is high time that we are already at the beginning of the curve. One must bear in mind that there are good companies which are worldwide suppliers of cages to big names like Timken and SKF. Another company is a global supplier to Timken for forged and turned rings. Three to five such entities have been able to establish themselves for such business.

Two, we are constantly looking for value addition because after turning, brass cages and steel rollers/balls follow. We also want to bring heat treatment. Rather than sending only turned rings and cages back to Timken or SKF, why not take the next step forward? We need to have world class lines here for heat treatment. Roughly 60 percent of the value of the bearing would be exported out of here. After that would be grinding, assembly and designing. I am sure that in the next decade, with centres of excellence, India could end up being the world supplier for forged bearing rings, turned bearing rings and heat treated rings. That could be in the order of $3 billion.

In forged and turned rings, our two companies are doing roughly Rs 500 crore worth of business and there is no reason why entrepreneurs should not step in for a larger share of the business. The bearing industry is also characterised by its fragmented nature. Roughly about Rs 4,000 crore are for domestic consumption for OEMs and replacement and Rs 1,100 crore is being imported. There is a grey market of Rs 900 crore and Rs 500 crore worth of bearings and bearing components are exported. There are about 300 companies playing in this arena.

LEVIES IMPERATIVE

In my view, there should be straight rationalisation where you must pay eight percent from Day One (today, it is excise exempt up to Rs 1 crore). Any bearing maker needs to invest nearly Rs 20 crore for a new a unit. Not more than 6-8 players have such commitments. We are losing the balance Rs 900 crore in terms of revenue and non-precise bearings (I would actually call them oblong and not ball bearings).

There are ten companies which are OEM classified and we insist that for the investments made, we need to bring into the market the right products. Those which are not OEM-classified should not be there in the first place. The total loss of revenue is very large and can wreak havoc in the market. Similarly, imports of components should only be permitted for large scale bearing manufacturers.

The other step that is critical is apprentice service programmes and certifications. There are many mechanics who can do well but do not have access to education. Textile machinery and machine tools associations can put up engineering centres. There are about 50 locations for car component industries and it is here where mechanics can get the right education. By the end of the day, the car repaired by them will ensure quality.

##### FORGING ALLIANCES

This should be a joint initiative because the bearing industry has alliances with the machine tools sector as well as vehicle and textile machinery makers. We could have regional partners also. For example, in Coimbatore, the textile industry is formidable and a tie-up could be envisaged with the ball bearing industry. In Bangalore, the machine tools sector could be roped in as an ally.

One of the areas which I would like to focus on is special economic zones or SEZs. These should be banned with immediate effect. In 1970, when the Backward Industry Declaration was made, there were problems in the form of inadequate roads and erratic power supply. These areas only need to be pruned a bit so that investments are not repeated for SEZs. When the Government wants entrepreneurs to go to Uttaranchal or Haridwar, it is tantamount to asking people to walk through the Sahara desert without the right tools! Our existing industrial centres can be embellished to give some output.

The type of sops given to companies in these new states can well be extended to Dharwad or Lucknow where companies like Tata Mootrs, for instance, already have their infrastructure present. What is the big idea of extending these goodies to barren areas? This is the only reason why companies are going to such godforsaken areas. SEZs are not needed and ten years down the line, Rs 300,000 crore worth of sops will have been given by both the Central and State governments. The benefits will, however, be miniscule.

FOLLY OF SEZs

In lieu of SEZs, the best bet would be to create good roads and educational/healthcare institutions. These will help people get employment across the board and impart long-term benefits. SEZs are a colossal loss to the exchequer. We also need to have at least two stand-alone bearing research centres. Bearings are precision items and need to be given the importance they deserve. In order to touch the $3 billion exports which I spoke of earlier, these will be a big help.

Centralised tool room centres will also have to be set up because right now we make the tools ourselves. We have some today (Jaipur is the turning centre for bearing rings as also Hyderabad and Rajkot but tool rooms here are not substantial) but need a lot more. Many engineering colleges in Germany, the US and UK are willing to fund such tool room centres because they could be a source of process knowhow for them back home. Finally, single window clearances are the need of the hour because we could set up plants in 8-10 months compared to 18 months today.
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