Ahmedabad: Samir Shah
never had such spare time in his life as an oil mill owner. This is,
after all, the peak season when mills buy oil seeds that are available
after the harvesting of kharif crops.
But the Saurashtra businessman has been sitting idle the past fortnight. There’s no cash to do business.
The demonetisation drive has left entrepreneurs like him with a shrunken wallet. And farmers don’t usually accept cheques.
"Normally,
during November and December, we are so busy that we don’t even have
time to go home for lunch. This time we have nothing to do. Our mills
are operating at 20 per cent capacity," said Shah, president of the
Saurashtra Oil Mills Association (Soma).
The cash crunch –
triggered by the central government’s November 8 move to withdraw old
high-value notes as part of its efforts to crack down on black money –
has not affected Gujarat’s oil mills only. The textile industry in Surat
and the ceramic business in Morbi district have been hit too, with the
currency crisis shrinking the purchasing power of people at both ends of
the production chain.
Shah said the demonetisation move had
brought the oil mill business to a standstill in Saurashtra, home to
around 800 mills that employ, on average, 60 workers each.
"Usually,
the mode of payment is cash as farmer don’t accept cheques. Now, after
the demonetisation drive, we don’t have cash, which has hugely impacted
the industry," he said, adding the situation was "going to worsen in the
coming days".
Shah has written to Prime Minister Narendra Modi,
explaining how the oil mill industry had come to a "standstill as a
result of demonetisation".
In his letter dated November 20, Shah
has urged Modi – the state’s chief minister before he moved to Delhi in
2014 – to reconsider his "ill-advised" decision to withdraw the old
500-rupee and 1,000-rupee notes saying it had affected transactions
along the entire chain – from the rural markets to wholesalers,
retailers and, finally, the end user.
"We are not against
cashless transaction, but were not prepared for it as yet. Moreover, all
cash transactions are not illegitimate and not all farmers that we
procure oil seeds (from) have bank accounts," Shah said.
It’s the
same story with Morbi’s ceramic industry, which has seen nearly 70 per
cent of its 600-odd factories close down because of the cash crisis,
said Nilesh Patel, the president of the Morbi Ceramic Industry.
The
biggest problem, he says, is that transporters have to be paid in cash –
Rs 25,000 per truck – for the raw material that comes from near Bikaner
in Rajasthan. Four truckloads are needed every day, which comes to at
least Rs 1 lakh a day.
"We have cash credit but no cash available," said Patel.
Yesterday,
members of the Morbi Ceramic Association had met district collector
I.K. Patel and told him if adequate cash was not made available within a
few days, the industry would have to shut down.
In a letter to
Kalraj Mishra, the Union minister for micro, smalland medium
enterprises, the Southern Gujarat Chamber of Commerce and Industry has
urged him to make cash available to the sector "as per their
requirement".
Otherwise, it said, "small units are likely to close down in (the) next few days" because of the "acute shortage of cash".
In
the letter, chamber president B.S. Agrawal said the processing houses
of Surat were about to be closed and "thereafter a whole value chain of
textile will be broken down".
Industry insiders are not the only
ones who are worried. Ajay Patel, the chairman of the Ahmedabad District
Cooperative Bank (ADCB), appeared equally anxious.
Like the
other 13,000 cooperative banks in the country, his bank, one of the
largest of its kind in Gujarat, has been barred by the RBI from
accepting or exchanging the withdrawn currency notes. Patel is worried
that his bank’s customers might migrate to other banks.
BJP national president Amit Shah was the ADCB chairman till 2003 and continues to be one of the directors.
According
to Gujarat government estimates, the state needs Rs 5,000 crore worth
of newly printed notes every day to meet the demands of its economy, at
least five times more than the Rs 800-1,000 crore that the RBI has been
giving in new notes to banks across the state.
The note crunch
was raised before a three-member team from the Union finance ministry
that arrived in Gujarat yesterday to get ground reports from
cooperatives and industry leaders.
The team of senior IAS
officers Guruprasad Mohapatra, R.P. Gupta and Nipun Vinayak met chief
minister Vijay Rupani and chief secretary J.N. Singh. Both requested the
Centre to pump in more cash into the state’s banking system.