Higher wages, octroi put SMEs at disadvantage

Tarit Guha, a cardboard manufacturer in Thane, plans to set up his new unit in Umargaon, Gujarat.

He believes it does not make much sense to stay put in Maharashtra anymore not least due to the higher wages here than elsewhere.

“We can’t afford to pay the wages here. When the government says small and medium enterprises (SMEs) are the backbone of the economy, it’s nothing but lip sympathy,” he said.

While the minimum monthly wage for a skilled worker in his industry in Maharashtra is nearly Rs3,800 including special allowance, it’s over 20% lower in Gujarat, which is considered to be among the most industry-friendly states.

“About 50% of the units in Umargaon were earlier in Thane,” Guha said.
Purushottam Agwan, who runs R K Dutt Concerns, an engineering firm also in
Thane, has similar plans. But he is not moving to the neighbouring state.

“I am thinking of moving from Thane to a Zone-II like Bhiwandi,” he said. Minimum wages in the state are fixed for 64 industries in three different zones. Zone-I refers to metropolitan cities and Zone-III villages.

A few days back, the state government hiked by up to 27% the minimum wages for the shop & establishment category, which refers to any unit of 10 workers with electricity-aided manufacturing or a unit of 20 workers without electricity. It does not need a SSI (small scale industry) registration.

“There was a revision in 2007 and the government is supposed to raise wages only every five years so we don’t know why it happened now,” wondered Agwan, who is honorary general secretary, Chamber of Small Industry Associations. COSIA and other SME bodies are planning to write to the chief minister on the same.

Shop & establishment constitutes 80% of small industries.

Agwan is of the belief the government might hike the minimum wages even for other industries, including his.
No wonder then entrepreneurs look at attractive alternatives such as Karnataka and Gujarat.

For instance, while in Maharashtra the minimum monthly wages for skilled and semi-skilled labour in the engineering segment are Rs5,124 and Rs5,024, respectively, in Gujarat they are Rs4,336 and Rs4,280, and in Karnataka they are even lower at Rs4,118 and Rs3,936.
There are also the categories of unskilled workers, and in some states, high-skilled labour.

Another hurdle to smooth functioning of SMEs in Maharashtra seems to be octroi ranging 4.5-5.2%, levied on entry of goods into a particular region.

This, along with the higher wage scenario, is the reason that city-based entrepreneur Dharmu Vanjani, whose firm SS Natu Plastics & Metals makes green motors, plans to follow in Guha’s footsteps and take his expansion plans to Gujarat.

Maharashtra is the only state yet to abolish Octroi.

Such added costs do not help companies in the state to stay competitive with their counterparts from the rest of the country.

“Our clients will not pay heed to the cost increase. If we have to survive, we have to move out,” said an industrialist, who runs a chemical firm near Pune, requesting anonymity.