Epitome of enterprise

Erodes weekly textile market draws buyers from the southern States, and the weekly turnover is in crores.-PICTURES: M. GOVARTHAN

Almost every region in Erode district has a cluster of business activity, which has flourished and has a niche in the market.

THE economic story of the Kongu region, Erode district in particular, is like a fast-paced action movie, where the goal of the characters is to succeed. The characters chose entrepreneurship as the way to meet this goal. A majority of entrepreneurs went in for textiles. But there were exceptions such as those who run SKM Egg Products Exports (India) Ltd., exporters of powdered egg; Sakthi Masala (P) Ltd., manufacturers of spices and masalas; URC Construction (P) Ltd.; and New Hope Food Industries Pvt. Ltd., the makers of Milka Wonder Cake. They have given a new identity to Erodes entrepreneurship.

The bulk of the textile industry, however, continues to remain anonymous. The absence of a brand is surprising, given that entrepreneurship in textiles is at least 30-40 years old, beginning with the introduction of the power-loom in the region. Until that time, the Sengunthars, a community of traditional weavers, were using handlooms. With their gradual exit from weaving, partly because of social mobility, the Kongu Vellalars, also called Gounders and basically farmers, entered the weaving trade.

Various reasons are given for this. One is poor returns from agriculture. The second, according to the historian and epigraphist Pulavar S. Raju, is that when a community moves away from its trade, the dominant community of a region moves into the space created. These reasons may have led the agrarian community to turn to weaving, but what sustains the entrepreneurship is strong community bonding, which is symptomatic of other communities in the region as well.

Professor R. Vaidyanathan of the Indian Institute of Management, Bangalore, in his paper Caste as Social Capital says, The needed capital was raised within the Gounder community, a caste relegated to land-based activities relying on community and family networks. He adds, Those with capital in the Gounder community transfer it to others in the community through long-established in- formal credit institutions and rotating-savings and credit associations. These networks were viewed as more reliable in transmitting information and enforcing contracts than the banking and legal systems that offered weak protection of creditor rights.

C. Devarajan, managing director of the Rs.250-crore company URC Construction, says his father raised the money necessary to build the company by borrowing from fellow villagers. The same holds good for the SKM group of companies as well. Shree Shivkumar, managing director, SKM Egg Products, says his father, S.K. Maeilanan- dhan, raised the money needed for setting up a poultry feed unit by borrowing from his clients, who also happened to be from his community. Several such ventures, big and small, grew in places in and around Erode. An interesting feature of growth of such ventures is that the industries developed in a cluster and with very little government support.

Almost every region in the district has a cluster of business activity, which has flourished and has a niche in the market, be it Bhavani carpets, Uttukuli butter, Chennimalai bedspreads or Kangayam oil. The proof of the mushrooming of industries is with bankers, who continue to lend over and above the deposits they receive. The credit-deposit ratio (CDR) has always been above 100 per cent. J. Vanangamudi, lead bank manager, Erode, says the CDR for the financial year ending March 2007 was 115 per cent and it was 118 per cent for the 2007-08 financial year. The total lending in the last financial year was Rs.6,513.55 crore.

The majority of the advances was to the priority sector, which includes small and medium enterprises. Under the Pradhan Mantri Rozgar Yojna, which is directed towards generating self-employment, Erode district has always achieved and surpassed its target of lending to enterprises. Given the entrepreneurial tendency and availability of credit both within the community and in the formal set-up, Erode district has grown to be a hub of medium and small enterprises. According to Gopal Srinivasan, chairman of the Confederation of Indian Industry (CII) Taskforce for the Development of Tier-II & Tier-III Cities, the district ranks fifth in Tamil Nadu in the number of small and medium enterprises and contributes 27 per cent to the States gross domestic product in industry and 36 per cent in services. Incidentally, it was only recently that the CII set up a chapter in Erode. This perhaps is a pointer to the region gaining in stature in the industrial circuit. Though there is a lot to cheer about, there is some cause for concern as well. Despite the last two or three decades of entrepreneurship, the textile industry has not evolved to the next stage and continues to weave with the same old shuttle looms.

D. Venkateswaran, vice chairman, CII, Erode, says the entrepreneurial spirit appears to have taken a beating for a couple of decades for the following reasons: second-generation entrepreneurs were not as adventurous as those of the first; the money made by enterprises was invested in land and other immovable assets so as to mitigate the effects of failure, if any; and weavers had little incentive to expand or innovate because the type of fabric woven three decades ago continues to have a market to date.

The fact that the entrepreneurship of Kongu businessmen did not extend beyond the region can be correlated to the fear of taking risks. They started their ventures within the region and found markets locally. It is only now that enterprises with Statewide and nationwide markets have started coming up. These few enterprises, which as mentioned earlier are non-textiles ventures, have remained in Erode for various reasons. The first and foremost reason was to help Erode grow, to strengthen the strong cultural links with the region and to give something back to society. And doing so has not worked to the industries disadvantage.

Sathiskumar Govindasamy of Hashprompt Logistics Management Pvt. Ltd. says it no longer matters whether one functions from Surampatty, a municipality near Erode, or Seattle; what matters is quality of service. His company manufactures vehicle-tracking systems under the brand name V Track. A United States-returned software professional, Govindasamy says it is important for him to function from Erode because I want to put Erode on the information technology map of India. The same is also true of K.P. Mutharasu of Zigma Technologies India (P) Ltd.

Devarajan of URC Construction also shares the same view. The man who aims to take Erode to great heights in the construction industry says he decided to have his headquarters in Erode in an effort to build Erode as a brand. His company has operations in Karnataka and Andhra Pradesh as well as Tamil Nadu and is known for building sugar mills and other industries.

In brand building Erode, the first company to have perhaps succeeded is SKM Egg Products. It is one of the three companies in the country that powder egg for export. A totally export-oriented unit, SKM Egg Products powders 12 lakh eggs a day to produce 14 tonnes of egg powder, which is exported to nearly 30 countries, says Shivkumar.

Erode is also on the State map for its Kongu Engineering College. In establishing the nearly 25-year-old institution, more than 30 industrialists of the Kongu Vellalar community came together with the sole purpose of offering quality education, says V.R. Sivasubramanian, the institutions correspondent.

New Hope Food Industries Pvt. Ltd. has also succeeding in putting Erode on the State and, perhaps, national map. A. Raja, managing director, says there could not have been any better place to start his industry than Erode, given its entrepreneurial culture. He has succeeded in marketing his Milka Wonder Cake, and also Erode, in Kerala, Andhra Pradesh and all over Tamil Nadu.

The rise in the number of industries in the region has resulted in a shortage of labourers. The worst affected by labour shortage is agriculture, the most important economic activity of the region. A CII report says that 59.86 per cent of the total workforce of 12.14 lakh is in agriculture. However, this figure is reducing fast because of better pay in industries and the decline in agricultural activity.

The decline again is because of the industries, particularly the dyeing, bleaching and textile-processing industries and the tanneries. The effluents from these industries have polluted the major irrigation canals of the district and also eroded the fertility of the lands. The worst affected by pollution are the farmers of Noyyal ayacut. Effluents from the dyeing factories of the dollar-rich town of Tirupur have turned the lands infertile, and it has been years since farmers there have set foot in their fields. Ongoing court battles over pollution are also proof of the threat the region faces.

The increase in pollution has led to a corresponding development in the health sector. For a city as small as Erode, the number of health care institutions speaks volumes. The most common hospitals are cancer centres and fertility clinics.

A pioneer and record-holder in assisted reproductive techniques, Dr. Nirmala Sadasivam of Maaruthi Medical Centre and Hospitals says use of polluted water, exposure to dust and long working hours has led to infertility among the men and women in the region. From fewer than a dozen patients a month when she started practice a decade ago, she today has about 40 people visiting her. She adds that it has been a norm that medical representatives from Erode always top the national sales chart of pharmaceutical companies.

The conflict between industry and agriculture with regard to pollution has one underlying factor: water. Without water, the textile-processing industry will not survive, nor will agriculture. Both are dependent on the fast-dwindling natural resource and both have a stake in preserving and harvesting it. But nothing much seems to have been done in this regard.

The State governments announcement that it would consider the discharge of effluents to the sea offers a glimmer of hope. That apart, the industry in this district has reason to cheer. Erode town has just been upgraded to a municipal corporation, the district has a special economic zone within the SIPCOT (State Industries Promotion Corporation of Tamil Nadu) industrial estate in Perundurai, and the Union government in the last Budget announced a mega textile cluster in Erode. How these things turn out will decide the future course of the district.