Narendra Modi's 'Make in India' falters as cheap imports, GST, demonetisation threaten sports goods industry in Jalandhar

One of the 13 Lok Sabha constituencies in Punjab, Jalandhar has for long been a Congress stronghold with Chaudhary Santokh Singh of Congress currently holding this seat.

Editor's Note: A network of 60 reporters set off across India to test the idea of development as it is experienced on the ground. Their brief: Use your mobile phone to record the impact of 120 key policy decisions on everyday life; what works, what doesn't and why; what can be done better and what should be done differently. Their findings — straight and raw from the ground — will be combined in this series, Elections on the Go, over a course of 100 days.

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Jalandhar: It's 5 pm and Vijay Dhir is preparing to shut his sports goods manufacturing unit for the day. Reclining in his leather chair, surrounded by samples of skates, rackets and cricket bats, Dhir recalls how five years ago his factory used to work two shifts to fulfil orders from India and abroad and close at 9 pm. Now, his evenings are spent in front of his television set.

Entrepreneurs like Dhir in Jalandhar, once a thriving hub of sports goods manufacturing in India, have today been hit hard by the flood of cheap imports. Jalandhar's home-grown manufacturing units, most of which were from micro and small enterprises segment, have taken a hit, especially due to the import of cheaper hockey sticks and footballs from China, Pakistan and Vietnam. 

Dhir and other entrepreneurs like him, who in their heyday employed lakhs of workers, have been pleading with the state and central government for help them upgrade their manufacturing technology and improve product quality to be able to compete with the cheap imports. However, they have received little help so far. On the contrary, demonetisation and the Goods and Services Tax (GST) only added to their woes.

While demonetisation hit the small entrepreneurs,  prices of the Indian-manufactured goods shot up further after the implementation of GST.

A labourer working on skates in a factory in Jalandhar

A labourer working on skates in a factory in Jalandhar

Out of the domestic market, around Rs 900 crore market is run by small and medium unorganised manufacturers, majority of which were exempted from even excise duty earlier. The implementation of GST spiked the prices of locally manufactured goods, with the current tax rates ranging between 12 to 18 percent in comparison to 6.05 percent tax on most items in pre-GST era. At the start of the new tax regime, which came when the entrepreneurs were still recovering from the brunt of demonetisation, the tax rates were a whopping 28 percent high. However, they were reduced to the 12-18 percent band after the government later rationalised tax rates on certain goods and services.

Meanwhile, the effect of demonetisation were not only faced by MSME units, who largely operated in cash, but also the labourers who worked in the sector.

Suresh Kumar, a migrant labourer from Bihar, is fixing grips on bats in a small, well-lit room. He, along with 15 other workers in the unit, used to earn Rs 8000 a month in 2016. "But after demonetisation, we were asked to work on a lesser salary or leave," said Suresh Kumar. "Those who could get jobs elsewhere left while my salary was cut to Rs 6,500 a month," said Kumar.

Most of these workers, including the migrant labour employed by the leather and sports goods manufacturing, are registered voters in Jalandhar and form an important voting bloc. This is why parties and candidates try to woo them by promising doles during election campaigns. However, only very little has actually been done for them.

One of the 13 Lok Sabha constituencies in Punjab, Jalandhar has for long been a Congress stronghold with Chaudhary Santokh Singh of Congress currently holding this seat. But that could change in the 2019 Lok Sabha elections given the anger among industry owners and workers over the inaction of the state and central leadership to curtail the inflow of cheap Chinese and Pakistani goods.

Dhir, who is also the convener of Khel Udyog Sangh, an association of sports equipment manufacturers, said that such imports "have turned many manufacturers and exporters into importers who import goods from these countries, put their label on them and sell in the domestic market." Their plight is similar to that of the cycle makers in Ludhiana, who too now import cycle parts from China, assemble them here, slap their own labels and sell in the local market.

"Cheap labour in these countries along with better technology has hit the Indian sports manufacturers in Jalandhar and Meerut hard," Dhir said. "Most of them have cut production as they find it more profitable to import and sell the hockey sticks, footballs, basketballs and cricket balls which they once used to make themselves."

A worker giving final touches to a bat in a factory in Jalandhar

A worker giving final touches to a bat in a factory in Jalandhar

These units are also facing hardships from an unexpected quarter — the gaurakshaks and their campaign against the killing of cows and preventing others from even selling the skin of dead cows. This has pushed up manufacturing prices of products like cricket balls, which once sold for Rs 150-500, as leather prices have shot up. Said a manufacturer who did not want to be named, "The shortage of leather is because of the campaign by cow vigilantes across the country."

Other issues include the manufacturers' inability to upgrade technology due to the lack of incentives from the government. Besides technology, other factors that push up the cost of production in Jalandhar are costlier electricity as compared to other states.

While Dhir was unable to give the exact number of units as most of them are in the unorganised sector, he estimated that Jalandhar city currently has between 600-700 units employing 1.5 lakh workers directly and indirectly.

Interestingly, Vietnam is emerging as a major exporter of footballs to India. As per official figures, football imports from Vietnam rose from Rs 8.86 lakh in 2011-12 to Rs 2.07 crore in 2017-18. On the other hand, Indian exports of footballs dropped from Rs 154.14 crore in 2014-15 to Rs 66.57 crore in 2017-18. It is a similar story with cricket bats, pads and hockey sticks, where exports have dropped and imports have gone up.

The tales of woe these figures represent are many. Like that of Gurmeet Singh Sachdeva, owner of Surjit Sports which imports sports goods from China. "Chinese products are of good quality and also cheaper," said Sachdeva. "There is an urgent need to introduce new technology in the Indian sports industry. While China and Pakistan are manufacturing fibre hockey sticks, we are still making wooden sticks. The footballs used at the World Cup are manufactured in China while the India-produced ones are used in promotion events." Even boxing gloves, once a well-known product from the Jalandhar units are being replaced by cheaper Chinese exports.

The negative impact of GST on this mainly unorganised sector has gone unnoticed. Sports goods fall under Micro, Small and Medium Enterprises and before GST introduction, enjoyed a largely paper-free trade in the domestic market. Now, they have had to invest in electronic payment systems, which many units found difficult to afford. Although there is no record of how many units closed down due to GST given the unorganized nature of the sector, those within the trade believe that it has had a major impact.

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And even as the industry was hoping the state government would help them out with tax and loan incentives, Finance Minister Manpreet Singh Badal in his budget speech could only propose “an iconic sports complex in Jalandhar which would encourage sports and give a boost to the sports goods industry."

The entrepreneurs, meanwhile, are left to their own devices, with some of them diversifying into new products like athletics products and weight training and personal training equipment. Maan Singh, who earlier made footballs, last year switched to manufacturing fitness equipment. "We are not experts in manufacturing these products," said Maan Singh. "But a start has to be made to save the industry."

With inputs from  Sikandar Singh

The author is an Amritsar-based freelance writer and a member of 101Reporters


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