Brake on livelihoods in the automobile manufacturing hub in Pune

Workers are the worst hit as the slowdown deepens in the automobile manufacturing hub in Pune.

At a Tata Motors factory in Pimpri, Maharashtra. A file photograph.

At 5.30 p.m. on a weekday, National Highway 4, or the old Mumbai-Pune highway, is usually packed with buses bringing to work and taking home employees from the several hundred automobile manufacturing units that are located in the Pimpri-Chinchwad and Chakan-Talegaon belt between Mumbai and Pune. In recent months, the roads wear a desolate look. There are very few buses at this shift-changing hour. The downturn in the automobile sector has seen thousands of workers being laid off this past year, and more retrenchments are expected. Datta Yelwande, president of the Rashtriya Shramik Ekta Mahasangh, one of the worker unions in the Pune automobile belt, said that there were slowdowns in the past but none was as bad as the present one.

It is almost a year since the decline began. Arvind Goel from Tata Motors Limited, based in Pune, said: “We thought the situation would improve after the general election in May, but it has become worse. With an alarming 30 per cent drop in the overall sales of vehicles across platforms, we are struggling.” In early August, Tata Motors shut its Pune plant for three days as production was in excess of the demand. Production has been reduced by at least half the usual capacity. Goel said the worst hit were the workers, particularly those who were not permanent. An estimated 40,000 to 50,000 people in the industrial belt are thought to have lost their jobs in the past two months. “Obviously, retrenchment is a sign of bad times,” he said.

With six assembly lines, the Tata Motors plant can produce up to 720 cars a day. The employment generated is huge. The reduction in or complete stoppage of production has affected thousands of workers.

Goel pointed out that the small and medium players in the industry must be faring even worse if the “big boy of the industry” had to halt production. The lack of liquidity in the market has led to a dip in demand. The new axle load norms, which allow an additional 20 per cent load, the Bharat Stage VI regulation that begins on April 1, 2020, and constant announcements that electric cars are the future, have also depressed demand. The plants are nowhere near being prepared to manufacture vehicles with the new specifications, whereas the government has led people to believe that these cars have been launched. Goel said that the need of the hour was to align production with actual demand and adjust the number of shifts and contractual manpower. Many of the OEMs (original equipment manufacturers) have appealed to the government to roll back goods and services tax, he said.

Over the past two decades, the Pimpri-Chinchwad, Chakan-Talegaon and Ranjangaon industrial zone in Pune grew into one of the largest automobile hubs in the country. Known as the Western cluster, this belt accounted for approximately 33 per cent share of the market, said a sector report. Maharashtra’s investment-friendly initiatives and its reputation as an industrialised State ensured that top automobile brands such as Tata Motors, Bajaj Auto, and Mahindra and Mahindra had plants in this belt. Multinationals such as GM, Mercedes Benz, Volkswagen also have huge facilities in the region. The presence of leading OEMs encouraged ancillary vendors to set up shop. Much of that work was sub-contracted to smaller units, creating a massive ecosystem that had thrived for almost 20 years. The State’s readily available skilled manpower was attractive to the industry. The employment generated sustained lakhs of people.

According to the Pimpri-Chinchwad Small Scale Industries Association, the downturn has affected about 12,000 small and medium industries depending on OEMs. The association says that in addition to retrenching people, managements have started doing away with the third shift because production has been scaled down. It estimates that five lakh people in the Pimpri-Chinchwad belt are affected by the slump.

Yelwande said: “There is no doubt the automobile industry did a lot for our people. Farmers were given good compensation for land taken. In fact, in recent years, the companies developed the land for farmers and now many get rent. This keeps incomes steady. We cannot blame them for what is happening in the economy. Unfortunately, it is the worker who takes the impact in these situations.”

Suresh Kamane, a worker in the automobile sector, said: “I earn between Rs.60,000 and Rs.70,000 a month as a permanent worker. I am a college graduate and have been working for 12 years with an auto component company. We may be laid off any day, and that will bring an end to a good income. We had a major slowdown in 2008, but nothing as widespread as this one.” He said confusing signals from the government were partly to blame for the crisis. Electric cars are touted to be the future and incentives are given to produce them. But electric cars do not require as many parts as cars running on petrol and diesel do, and so companies are reluctant to invest in petrol/diesel products. Entire assembly lines have been halted in component units and OEMs because of this.

A spokesperson from a German multinational company located in the Chakan-Talegaon section that sells components to many automobile majors says while the slowdown may not be showing any sign of abating even with the festive season around the corner, it is also cyclical. He believes the industry is robust and will find ways of reviving. He says the rural economy will improve after a successful monsoon and in turn produce a demand for tractors, trucks and two-wheelers. The cycle may take longer to turn in the case of passenger cars because of the liquidity crunch and crisis in the non-banking finance companies (NBFC) sector.

Daulat Keswani, owner of Auto Steel and Rubber Industries Private Limited, a medium-scale rubber ancillary manufacturer in Bhosari Industrial estate near Pune, agreed that the slowdown had a cyclical character and asserted that it had never been so bad. Overproduction on the back of optimistic sales projections had backfired for the industry. Keswani said, however, that a good monsoon always revived the rural economy in India and had an effect on the larger economy. “We have had sufficient rainfall and hopefully that will show results around October,” he said.

Farookh Cooper, who owns Cooper Corporation, a large-scale, component manufacturer based in Satara, said: “It has been one shock after another. Too many decisions too quickly. The economy cannot withstand this assault.” . He added: “Moves such as Bharat Stage VI will increase the cost of vehicles tremendously. It took the Europeans a decade to shift, why should we do it all in two years?”