Supply chain blocks, lack of labour push MSMEs in Chennai to the brink

The second of a five-part series focuses on how the lockdown has compounded the woes of already-struggling firms

S Ashokan, proprietor of Srivari Alloys, in the Ambattur Industrial Estate in Chennai, is running his factory with only around 15 per cent of his workforce, even though he is allowed to function with 33 per cent.
 
Almost 80 per cent of its workers are from other districts and another 10 per cent are migrant labourers, and a majority of them are not able to get back to work either due to the lockdown or due to fear of the growing number of Covid-19 positive cases in Chennai. Srivari Alloys, manufactures aluminium alloys, high pressure die castings and precision machine components, and supplies to companies such as TVS Motor, Simpson & Company, TAFE, among others.
 
“I have 40 machines running in three shifts, of which, only eight are now running on one shift,” says Ashokan, whose company had a turnover of Rs 45 crore last year. “My fixed expenses (rentals and wages) were around Rs 60 lakh even during the lockdown period. Plus, I have to pay an EMI of Rs 13 lakh per month for my loans,” he says, adding orders from the passenger car industry had been down by almost 50 per cent for nearly six months.

 
The lockdown has only compounded his woes. 
 
T E Soundararajan, owner of Fluidtech, a medium-scale company, has a similar story to tell. The company, which manufactures furnaces, has around 90 employees, but is now running with only 18 people. The non-availability of workers with specialised skills has become a huge problem. Though Fluidtech has arranged for vehicles to pick up around 5-10 workers daily, this is an additional cost, points out Soundararajan.
 
Supply chain is another concern, as many of the sub-contractors are not functioning as yet, and because their work is specialised, it cannot be assigned to other companies either.
 
Soundararajan feels that the central government’s relief package to mitigate the crisis faced by industry in the wake of the lockdown to tackle the coronavirus pandemic, will not solve the problems of the micro, small and medium enterprises (MSMEs). The additional loans may not be of much use for smaller units, he says, adding that the moratorium announced by RBI also means little since they would have to pay interest after the moratorium period.

 
Indeed, most entrepreneurs in the major industrial estates of  Chennai are unimpressed with the government’s economic package. “If this is the level of measures (under the Rs 20 trillion package) the government is offering, I am afraid it is all over for the MSMEs,” says A N Sujeesh, president of Ambattur Industrial Estate Manufacturers Association (AIEMA).

“If I borrow funds, it should be for investments, not to repay my existing loans. If I am forced to borrow to repay my loans, it is a point of no return. What the government has given us as a stimulus, is further borrowings to repay your existing borrowings,” says Sujeesh.

S Shanmugam, managing partner at India Industries, an industrial and auto components manufacturer, which supplies to TVS Motor, feels that  the moratorium on loans is a good move, but banks should not charge interest after the moratorium period. Their factory, which used to employ 60 people, now has around six to 10 workers, who are mostly carrying out maintenance work.

“The government should have given one year’s moratorium without interest. Industry has been paying taxes for 72 years, why can’t the government waive  taxes from industry at least for one year during these tough times,” asks Shanmugam. He adds that while the Centre has announced additional loans for MSMEs, many will find it difficult to get banks to approve them.

The Tamil Nadu government’s Small Industries Development Corporation Limited (SIDCO) industrial estate in Ambattur houses about 2,400 units and most of them are MSMEs. And in and around the estate, there are around 20,000 micro and small outfits which depends on business from the industrial estate. Almost 95 per cent of the units in Ambattur are devoted to auto and allied industries and more than 90 per cent of its revenue comes from this sector. And almost 75 per cent of the industrial estate’s manpower has traditionally come from other states.

But it is not only Ambattur which is struggling with lack of manpower, lack of orders and supply chain issues. S Dilli, proprietor of Sri Chellaiamman Industries in Thiru Vi Ka Industrial Estate, Guindy in Chennai, which produces sheet metal shearing and folding jobwork, says that though he opened his unit two weeks ago, the order flow is dry. Also, in place of the six workers he had before, he has just two now. The other four were migrants and have gone away. 

Similarly, Sri Raghavendra Fabrications, which manufactures shearing, folding and press components and is a sub contractor to ICF and Chennai Corporation, used to have around six to eight workers from Chennai and its outskirts. M Manohar, the proprietor, says he has had only one worker since he opened up a few days ago. With no public transportation, the others cannot come to work.

Small units are facing other pressures, too. Some are being asked to forego GST, while those with limited workers are battling to retain their orders and not have them given to competitors. “While we are paying GST, those who are placing orders are demanding that we offer products without GST. We definitely cannot exempt GST,” says Manohar. He, too, doesn’t believe that the Centre’s announcements will result in any actual support for the MSMEs. “Only the influential and large players will be able to get something. For people like us, there is no hope,” he says with despair.

A supplier to the automobile industry says the units without sufficient manpower are under pressure from even their long-term clients, who want to move to other vendors who have the staff strength to complete the jobs. Since orders are limited, there is stiff competition for them. Some manufacturers feel that many units in these industrial estates may not survive the current crisis and may close down.

The state has last week allowed 17 industrial estates in the State including Guindy and Ambattur Industrial Estates to start operations with restricted manpower from May 25, subject to various conditions including that those who are residing in the containment zones should not be allowed to come to work.