Lockdown 3.0: Re-starting production a task cut out for India Inc

Rusty machinery, lack of labour, confusion over rules bug corporate honchos

Cranking up rusty machinery and plants and oiling old processes is proving difficult with hardly any labour, zero demand, travel restrictions, conflicting rules, and broken supply chains.
 

For the past week as the lockdown restrictions have been eased, CEOs have realised that restarting production - while simultaneously putting sanitation measures in place - is not for the faint-hearted.

It's a confusing situation in many cities as some employees make it to work while others remain stuck at home because of restrictions on people moving from a red zone to a green zone to prevent the spread of coronavirus. In the midst of it all, like a sinister backdrop, the number of infections keeps rising to 62,939 cases with 2,109 deaths across India (see chart).

 

"Things have started opening up in lockdown 3.0 and there is more activity than before and domestic sales have started picking up much better than the past but we have a long way to go yet," said T V Narendran, MD & CEO of Tata Steel.

ÇEOs are struggling with lack of coordination between the local authorities and the police on interpreting the guidelines for the partial re-opening of the economy. Rajiv Bajaj, MD, Bajaj Auto, said the company's plants in Chakan and Aurangabad in Maharashtra haven't been able to achieve 'meaningful production' despite obtaining the requisite approvals and despite complying with the guidelines.

Similar confusion emerged in other states. Sources from the automobile industry in Tamil Nadu said the government website for companies to apply for passes failed to function. Some companies approached the district administration for help but they refused to let companies submit applications manually.

Finally, after a three-day delay, the district administration allowed applications for reopening production to be sent to private email IDs. Later, on hearing that handing in applications in person was also permitted, a crowd of some 100 company representatives jostled outside the district administration's office which had to start working around the clock.

Every step of the way seems marred by delays. Industry sources say that while Hyundai managed to receive its permit for re-opening on May 6, most of its vendors could not get their approvals and this caused a delay of two days. Hyundai did not respond to email queries.

Electronics component manufacturer Salcomp, which has a plant at Sriperumbudur near Chennai, is allowed by a Tamil Nadu government order to work with 50 per cent of its normal work force. It restarted operations on May 6 but very few of its employees reported for work as logistics was an issue.

"Many zones are containment zones and hence bringing workers from or through such locations is a challenge," said Sasikumar Gendham, MD, Salcomp Manufacturing India. In any case, some workers are staying away from work for fear of catching the virus.

An official in a leading cement company in south India said only a few cement plants have resumed operations and those that have are operating with a reduced workforce. The companies are meeting cement demand from their available stocks. Many corporate offices and related offices have not yet re-opened and employees are still are working from home.

"Corona and lockdown have hit the industry badly in the first quarter. We are looking at various austerity measures and plan to cut expenditure so as to have a lean and efficient organisation," said the CEO of a cement plant, asking not to be quoted.

Industry also faces a lack of capital with banks preferring to keep their funds with the Reserve Bank at low interest rather than lending to corporates for production, said the same CEO.
 

Real estate companies across the cities are reeling from the exodus of construction workers to their villages. Kamal Khetan, CMD, Sunteck Realty, said the construction industry supports 200 allied sectors such as steel, cement, electricals, and tiles and therefore it will have to be the first off the block for the rest of the economy to start stirring out of its coma.

"In the last one week, we managed to restart production in some of our Mumbai sites as we kept labour at the site and provided them with food and shelter. But we are still far, far away from full capacity production," said Khetan.

A similar story is being played out in the steel industry. An AM/NS India spokesperson said its India operations have restarted production units including those for Corex, Conarc hot strip mill, and compact strip mills.

Production at its blast furnace has been ramped up to keep pace with demand. However, normalising the supply chain and ensuring a production ramp-up at the customer end are proving to be challenges.

At ITC the picture was a bit brighter with around 100 of its factories reopening and producing essential items. The company said health and hygiene protocols are being strictly observed.