Chandigarh: Chandigarh SMEs are now hoping to scale up their business as Parliamentary Committee on the Union Territory of Chandigarh appointed by the Union ministry of home affairs has approved the conversion of leasehold industrial plots into freehold.
The Chandigarh industrial area has 3,000 industrial plots, of which 1,800 are on a leasehold basis. Most of them were allotted in the late 1970s and early 1980s by the Chandigarh administration.
The industrial area has a cluster of nearly 250 fastener manufacturers (which make a wide range of nuts and bolts) - the largest in Asia. SMEs in Chandigarh have been fighting for conversion of leasehold into freehold, because land held on lease cannot be used as collateral when seeking working capital from banks.
Vinod Mittal, president of the Chamber of Chandigarh Industries, said that the Union Territory administration of Chandigarh sent the proposal for conversion of plots to leasehold in 2009, and this had indicated a revenue of about Rs 450-500 crore for the Chandigarh administration (from the one-time fee that is charged for conversion of plots from leasehold to freehold). Successive teams of officials put the proposed conversion on the backburner, said Mittal.
"The industrial landscape of the country and the world has drastically changed in the past three decades, but we are stuck with obsolete technologies," said Naveen Miglani, who has been running a tractor ancillary for the past 30 years.
"We cannot upgrade technology without bank funding, for which we need collateral." Miglani said SMEs are unable to take advantage of the relaxation of the collateral requirement for bank loans of up to Rs 1 crore, because banks want to lend secure funds.
Bankers spot many lacunae in project reports and create roadblocks in raising funds where collateral is not involved. A small industrial plot can help generate substantial income with modern technology and hi-tech infrastructure, which Miglani says SMEs do not have owing to lack of access to funds.
"There is also lack of clarity on inheritance of the leasehold property in case the owner dies, and many plots are under litigation," he added. Chandigarh houses the largest fastener manufacturing hub in Asia.
It could have been the world's number one if government policies were responsive to the changing needs of industry, said A L Aggarwal, a veteran of the fastener business. The neighbouring states, understanding industry's requirements, have converted industrial plots from leasehold to freehold. But the issue has been hanging fire for many years in Chandigarh.
The Chandigarh industrial area has the lowest floor area ratio of one in the region, as compared to two in Haryana and 2.5 in Punjab. The local industry has been demanding an increase to 1.5, but in vain, added Aggarwal.
Close to 500 small units are closed in the Chandigarh industrial area due to litigation and relocation of ancillaries to Punjab, Haryana and Himachal Pradesh. The administration has in recent years permitted a change of land use from manufacturing to commercial purposes for bigger industrial plots.
But small entrepreneurs who simply want a revision in ownership terms in order to expand and upgrade their businesses have been ignored.