Punjab's MSMEs battle land and power woes, all eyes on new industrial policy

Time of India

6 days ago

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Some key issues that need government attention, particularly high-interest rates that hinder MSMEs from securing funding for their operations and growth.
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Punjab's geographical location increases operational expenses; steel costs are higher due to transportation.
Micro, small, and medium enterprises (MSMEs) in Punjab highlight inadequate infrastructure, such as erratic power supply, high land costs, and labour shortages, as key challenges impeding their growth. These issues, they say, are undermining the competitiveness of local MSMEs compared to those in other states and are impacting the broader industrial ecosystem of the region. However, there is a sense of cautious optimism regarding the upcoming industrial policy in the state, which the Punjab government aims to finalise by November this year.During a recent event, Punjab's Industries Minister Sanjeev Arora stated that the upcoming industrial policy is designed to enhance the state's appeal as an attractive investment hub. The government is setting up sector-specific committees to develop the policy framework as part of this initiative. These committees will offer targeted recommendations across various key sectors, including textiles, IT, sports goods, bicycles, automobiles and components, heavy machinery, electric vehicles, renewable energy, food processing, steel, chemicals, tourism and hospitality, film and media, pharmaceuticals, retail, and manufacturing.The state government has formed 24 sector-specific committees, each comprising 8 to 10 industry experts and headed by a designated chairperson. These committees, with a tenure of two years, will function as advisory bodies to the government, offering insights into sector-specific needs and suggesting relevant policy changes.According to Dilpreet Singh Boparai, General Secretary of Mohali Industries Association (MIA), MSMEs in Punjab face several challenges that impact their growth and competitiveness. Some key issues that need government attention, particularly high-interest rates that hinder MSMEs from securing funding for their operations and growth.'We are hopeful that the state government will reconsider the 0.25% stamp duty imposed on the loan amount for loans sanctioned by banks or loan crediting companies earlier this year in January and February. This added cost places an additional burden on MSMEs, which are already grappling with limited access to affordable funding. In addition to this, MSMEs in Punjab are facing rising land costs and a growing shortage of skilled manpower, primarily due to labour migration from states like Uttar Pradesh and Bihar,' adds Boparai.There is also a need to resolve the issue of unreliable power supply since it hinders production and efficiency, increasing operational costs and affecting overall business performance, adds Boparai, who is also the Director of Mohali-based VK Engineering Works. Moreover, power subsidy schemes ought to be allocated exclusively to those who are truly in need; extending them universally is resulting in unnecessary power outages, he asserts.Boparai expresses support for the new industrial policy, noting that the formation of sector-specific committees is a first-of-its-kind move for Punjab. 'As of now the committees are being finalised, and comments have been sought from us till October 1. We look forward to explaining our sector-specific needs. I hope the policy improvement comes and helps MSMEs.' Ashwani Kumar , former president of the Federation of Indian Export Organisations ( FIEO ), has long believed in the immense potential of Punjab's MSME ecosystem. However, he notes that the trade tariffs imposed by US President Donald Trump have created challenges that could undermine the export competitiveness of India's MSMEs.However, Kumar, who has been appointed by the Punjab government to chair the panel on the machine and hand tools sector under the upcoming industrial policy, remains optimistic. He believes that with the right policy interventions and by addressing key challenges, the situation can still be significantly improved.'Punjab's most pressing issue is the steep cost of land,' says Kumar, Partner at Jalandhar-based Victor Forgings. 'Even when land is available, it's often located in remote areas, making daily commuting a challenge for workers. Moreover, acquiring land involves multiple additional charges. We have urged the government to remove land use and conversion fees to ease the burden,' adds Kumar.He points out that even in designated industrial areas where operations have commenced, critical infrastructure, such as proper roads and sewage systems, is still missing. 'The formation of these sector-specific committees is a welcome move; it indicates that the government is finally paying attention. It's a promising initiative, but the real test lies in how well it is implemented on the ground.'Kumar praises the inclusion of sectors like sports goods and tourism in the new industrial policy. 'We will be submitting our recommendations to the government within a month. Right now, micro enterprises are on the brink of collapse. Reviving and sustaining these units will be a major priority for us,' he adds.Ludhiana-based industrialist and President of the MSME Industries Association, Badish Jindal , welcomes the state government's initiative to introduce a new industrial policy. However, he emphasises the need for a fresh perspective this time, urging the government to take a more detailed, sector-specific approach that addresses the unique requirements of each industry.'Invest Punjab's benefits are most pronounced for industries with high power consumption or significant value addition, such as the steel sector. However, sectors like bicycles, which face challenges like an inverted duty structure, have seen limited advantages. Recognising this, the government has set up sector-specific committees to address the unique needs of industries like bicycles, where the focus is less on power incentives and more on streamlined procurement policies. These committees are currently gathering feedback from various industries to ensure the new policy framework delivers targeted benefits across all sectors,' says Jindal.Jindal concurs with Boparai, emphasising that high land prices continue to pose a significant challenge, with even large-scale industries finding it difficult to acquire land in bulk. He says land acquisition remains a sensitive matter, as attempts to convert fertile agricultural land often face strong opposition from farmer organisations. He points out that compounding the problem is the lack of progress in developing new industrial zones in Punjab, with Ludhiana being the last major initiative, undertaken as far back as 1998.'Labour availability is another concern. With industrialisation gradually picking up in states like Uttar Pradesh and Bihar, many migrant workers are returning home, creating a labour shortage in Punjab. As a result, wages have nearly doubled,' notes Jindal.Additionally, Punjab's geographical location increases operational expenses; steel costs are higher due to transportation, and distance from ports drives up freight charges, according to Jindal, who adds that producing the same product in Ludhiana can cost Rs 4 more than in Kolkata.Power costs are also high, and during the paddy season, industries often face disruptions due to electricity shortages, says Jindal.Meanwhile, the Punjab State Electricity Regulatory Commission (PSERC) has announced a hike in industrial power tariffs, effective from June 15 to October 15, to manage the surge in electricity demand during the paddy cultivation season. As per the revised rates, industrial users will incur an additional surcharge of Rs 2 per unit during peak hours (6 pm to 10 pm), pushing the total cost to Rs 10 per unit from the current Rs 8.'The surcharge is hurting us badly. In its election manifesto, the Aam Aadmi Party (AAP) had pledged to provide electricity to industries at Rs 5 per unit, but no steps were taken toward fulfilling this promise in the latest budget,' says a Ludhiana-based veteran industrialist.Jindal says most policies under Invest Punjab favour new industries, offering them cheaper land and power, while existing industries receive little support. 'This creates unnecessary competition between old and new businesses. We've urged the government to attract industries that are currently not present in the state and can generate substantial employment, instead of fostering rivalry within the existing ecosystem,' notes Jindal.Notably, other states are actively courting Punjab's industries by offering lower land prices and addressing key infrastructure concerns, such as ensuring uninterrupted power supply. On July 7, Madhya Pradesh Chief Minister Mohan Yadav met with industrialists in Ludhiana. He revealed that his state has received investment proposals worth Rs 15,606 crore from Punjab-based businesses.A Jalandhar-based industrialist highlights how persistent infrastructure woes have taken a toll on their business. 'Frequent power cuts force us to depend on expensive generators,' he says, adding that profit margins have already dipped from 6-10% to just 3-4% and could fall further to 2-3% if the situation doesn't improve.reached out to the office of the Punjab Industries Minister for comments through an interview request; however, no response was received by the time the story was published.Ashok Kumar Mittal, Rajya Sabha MP from Punjab and member of the Aam Aadmi Party (AAP), says Punjab's industrial foundation is rooted in its legacy of resilience and enterprise. While the state is home to an impressive 1.8 million MSMEs, he notes that the ecosystem continues to grapple with a mix of internal and external challenges. Mittal refers to the recent Economic Survey (January 2025), which highlights that the regulatory landscape for MSMEs across India continues to be complex and challenging. 'In Punjab, this translates into a significant compliance burden that keeps businesses small,' he adds.Mittal points out that this complexity has contributed to a persistent 'tendency for firms to remain small'—a major concern, as it prevents them from scaling up and accessing institutional credit, skilled talent, and advanced technology, often forcing them to operate within the informal economy. He adds that access to finance continues to be a significant challenge for these enterprises. 'While the national addressable credit gap is estimated at Rs 30 lakh crore, for Punjab's micro-enterprises, this means a continued reliance on informal credit sources. This is especially true for our women entrepreneurs. While they now own over 26% of proprietary MSMEs, they identify credit access and intense competition as their biggest barriers to growth,' notes Mittal.On the vision behind Punjab's new industrial policy and the formation of sectoral committees, Mittal says the aim is to shift away from a generic, one-size-fits-all model towards a more specialised, sector-specific approach. 'For years, industrial policies have been broad. But the challenges for a bicycle manufacturer in Ludhiana are very different from those for a sports goods maker in Jalandhar or an agro-processing unit in Malwa. By setting up these sectoral committees, the government is attempting to perform a precise diagnosis of the specific pain points, regulatory hurdles, and infrastructure needs of each key industry,' adds Mittal.