Coimbatore's Micro and Cottage Industries on the Brink of Collapse
Micro and cottage industries in Coimbatore are staring down the barrel of potential closure as manufacturing companies persistently slash job order rates, exacerbating the impact of sharply rising raw material costs. This alarming trend has placed more than 30,000 entrepreneurs across the district in a precarious financial position, with many struggling to sustain their operations.
Mounting Pressure on Job Workers
According to J James, the district president of the Tamil Nadu Association of Cottage and Micro Enterprises, manufacturers have been systematically reducing hourly rates for job orders over the past three years, even as costs have surged. These small-scale units specialize in machining and component work, utilizing raw materials supplied by larger industries. They serve a diverse array of sectors, including automobiles such as two-wheelers, cars, buses, lorries, and tractors, as well as pump and motor manufacturing, wet grinder production, textile machinery, compressors, and even defense components.
Despite manufacturers increasing the prices of their finished products by 10% to 20% to offset rising raw material expenses, these benefits have not trickled down to the job workers. Instead, the hourly rates for job orders have been steadily cut, placing immense financial strain on small entrepreneurs.
Unsustainable Cost Increases
James highlighted that a steep rise in rent and a sharp increase in workers' wages have created an unsustainable environment for these micro units. Compounding the issue, the prices of essential production materials have skyrocketed by 50% to 100% over the last two years. Key items affected include toolbars, inserts, drills, tips, oil, and waste, all critical for daily operations.
Entrepreneurs who have invested substantial sums—often several lakhs through bank loans—to procure high-cost machinery are now facing severe financial distress. This equipment includes lathes, CNC machines, VMC systems, GD Wailers, radial drilling units, and turn milling centres, which are essential for their work but have become burdensome due to declining revenues.
Exploitation Amid Limited Opportunities
Manufacturing companies are taking advantage of the limited availability of job orders to drastically reduce the hourly rates paid to job workers. This predatory practice has led to significant disparities in compensation. For instance, CNC machining units, which should ideally receive ₹350 per hour, are now being paid as low as ₹150. Similarly, for VMC operations, where the standard rate is around ₹550 per hour, companies are offering only about ₹250.
This drastic reduction in rates, coupled with soaring operational costs, has pushed many micro and cottage industries to the edge of viability. Without intervention, the continued erosion of job order rates threatens to shutter thousands of small businesses, impacting not only the local economy but also the broader supply chains across multiple industries.
