7,600 companies shut shop in Telangana in 2 yrs

Hyderabad: A whopping 7,627 companies have shut shop across Telangana in two years up to December 2015 indicating a high mortality rate among the companies and business entities that are being set up in the state, according to a recent knowledge report on the manufacturing sector in Telangana unveiled by the industry body CII in association with Yes Bank.

The report titled ‘Telangana: Gateway to the Future of Manufacturing’ was released by Industries and IT Minister KT Rama Rao at the CII Telangana’s Manufacturing Excellence Summit (Man’Exe 2016) held in the city last week. The 80-page report focused on the industrial policy of Telangana, investment opportunities available in various sectors and infrastructure details. It also came out with a slew of recommendations for attracting investments into the manufacturing sector.

“While new investments are needed for the development of the state, the existing industries need greater amount of support to address their challenges and avoid mortality. As per Ministry of Corporate Affairs, of the total 61,333 companies that closed operations in India during 2012-16 period, 7,627 companies (12.5%) were from Telangana.

Such a high mortality rate could greatly impact the overall investment climate in the state and adversely influence investor confidence,” the report observed. It is imperative that special measures be taken in the state to support the revival/growth of existing industries, especially MSMEs (micro, medium and small enterprises), it said in its recommendation on ‘strengthening existing industries’.

The report cited the official statistics quoted in a reply given by Union Finance Minister Arun Jaitley to a question in Lok Sabha last December. Though the Union Minister pegged the number of the closed companies between 2012-13 and 2015-16 (for four years) at 61,333 across the country; in case of Telangana, it was only for two financial years i.e 2014-15 and 2015-16 because the State came into existence only in 2014.

As per official statistics in the reply, Telangana saw closure of 6,923 companies during 2014-15 (the first financial year as a new State) and 704 companies till December in 2015-16. That means a total of 7,627 companies – among the highest in the country- has shut operations in less than two years after the formation of Telangana. Currently, the State is home to over 80,700 companies.

V Anil Reddy, former president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry (FTAPCCI), said that a large number of industrial units slipped into financial distress on the account of power cuts in 2013-14 and earlier.

“Industrial and business sectors faced acute power shortage. Add to that, bankers also did not come forward to extend support. As result, several companies turned non-performing assets (NPAs) and were forced to shut operations due to a cascading effect which continued till 2014-15,” Reddy told The Hans India.

According to him, steel, foundries, engineering and plastic units, for which power is an essential input, have been impacted severely. “Nearly 50 per cent of foundries and steel company had to close their operations in the State,” he explained, adding that a large chunk of small scale units had also taken a hit and shut operations. He however said situation has improved a lot now thanks to the continuous power supply being provided to the industries by the TS government.