Ludhiana's Industrial Hub Demands Structural Reforms Ahead of Union Budget Presentation
As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on Sunday, February 1, the industrial city of Ludhiana is voicing urgent demands for structural reforms to rescue its micro, small, and medium enterprises (MSME) sector from a deepening crisis. Known as the "Manchester of India," this manufacturing powerhouse has outlined a comprehensive roadmap for the finance ministry, highlighting critical issues that need immediate attention.
Inverted Duty Structure: A Major Hurdle for Manufacturers
At the top of Ludhiana's agenda is the elimination of the inverted duty structure under the Goods and Services Tax (GST) regime. Local manufacturers describe this system as having "crippled" their working capital. Currently, many raw materials attract an 18% GST rate, while finished products like bicycles are taxed at only 5%. This discrepancy forces businesses into what they call a "labyrinth of documentation" to claim tax refunds, creating significant administrative burdens and cash flow challenges.
Industry leaders are advocating for a fundamental change: they argue that GST on finished products should be equal to or higher than the tax on raw materials. This adjustment would eliminate the need for convoluted refund processes and provide much-needed financial stability to manufacturing units across the region.
Comprehensive Demands from Industrial Bodies
Prominent industrial organizations, including the United Cycle and Parts Manufacturers Association (UCPMA) and the Chamber of Industrial and Commercial Undertakings (CICU), have submitted detailed proposals to the government. Their demands extend beyond GST reform and include:
- GST Rationalization: Creating a more balanced and simplified tax structure
- Special Punjab Package: Targeted economic stimulus to counter the state's slowing industrial progress
- Technology Upgradation: Modernization support for key sectors including textiles, auto components, and sports goods
- Freight Subsidies: Essential support for exporters to bridge competitive disadvantages caused by Punjab's distance from major seaports
Innovative Proposals for Sector Revival
The industry has put forward several innovative suggestions to stimulate growth. One notable proposal involves allowing companies to utilize 50% of their Corporate Social Responsibility (CSR) funds specifically for technology modernization in priority sectors over the next five years. This approach would channel existing resources toward critical industrial upgrades without requiring additional government expenditure.
For exporters facing challenges from the weakening rupee, there are calls for income-tax rebates similar to those provided during the 1991 currency crisis. Additionally, the industry seeks stronger anti-dumping measures against cheap imports, particularly in the bicycle-and-parts sector, along with research and development support for indigenous electric vehicle (EV) technologies.
Addressing Structural and Regulatory Challenges
Beyond immediate financial concerns, Ludhiana's industry leaders are calling for broader structural reforms. They advocate for tax parity between traditional partnership concerns and Limited Liability Partnerships (LLPs) to encourage reinvestment and business growth. LLPs, which blend partnership flexibility with corporate liability protection, have become increasingly important in the modern business landscape.
Steel users in the region are demanding the creation of a regulatory body to stabilize erratic raw material prices, which have surged uncontrollably in recent times. With many Ludhiana manufacturing units transitioning from conventional parts to EV components, there is also a strong push for the government to extend EV incentives beyond the current FAME (Faster Adoption and Manufacturing of Electric Vehicles) framework.
Industry Voices Concerns About Future Viability
"The industry needs simplified compliance and resolution of mixed-land use issues," stated Rajnish Ahuja, president of the Apex Chamber of Commerce. "We are contributing significantly to the nation's manufacturing output, but without a targeted revival package, the local industry is lagging dangerously behind."
Ahuja's comments reflect broader concerns about Ludhiana's industrial future. The city's manufacturers emphasize that while they continue to contribute to national economic growth, they require specific policy interventions to remain competitive in an increasingly challenging global market. The upcoming Union Budget represents a crucial opportunity for the government to address these concerns and provide the structural support needed to revive one of India's most important manufacturing hubs.
