Manufacturing industry gears up for life after coronavirus lockdown

Industry hopes for return of labour, smoothening of supply chain, lowering of inventory

The domestic manufacturing industry is preparing to resume operations when the 21-day nationwide lockdown to check the spread of coronavirus disease (Covid-19) ends. Towards this end, firms are focusing on bringing production back to the pre-lockdown levels.

Sajjan Jindal-led JSW Steel said on Friday “it was making all preparations to recommence operations at all locations on lifting of lockdown in the next few days”.

All leading electronics players — including Samsung, LG, Xiaomi, Godrej, Panasonic, Blue Star, —are holding virtual meetings with stakeholders and government officials to chalk out a resumption plan, being monitored by an empowered group of ministers (EGM).

According to sources, government officials have asked industry bodies and manufacturers to submit key concerns and requirements to begin manufacturing activity. The EGM is expected to meet on Wednesday to take a call on allowing electronics manufacturers to start production.

Jindal Steel & Power (JSPL), which has been working at full capacity despite the lockdown, is exporting 80 per cent of its production through Dhamra, Paradip, Vizag and Gopalpur which remain functional. It sees logistics as a big hurdle.

“Currently, availability of truckers for customers to unload material is a big issue. Once the lockdown is lifted, truckers will return to work,” VR Sharma, managing director, JSPL, told Business Standard. “In the domestic market, we are delivering material to the nearest railway station to customer, who in turn are arranging the local transport to take it to their facility,” said Sharma.

Most electronic industry players, too, raised the issue of logistics since sourcing raw materials is no longer a concern as production units in China have already surpassed 70 per cent capacity. A representation has been made to the government to fast-track shipping of goods from key ports, like Mumbai, so that transport time between Mumbai port and factories in North India can be cut by two days.

Shree Cement, which is ready to start operations, voiced concerns over availability of labour. “We are technically ready to start our cement plants as and when the lockdown is lifted,” said HM Bangur, managing director for Shree Cements.

The Rajasthan-headquartered company has a domestic capacity of 37.9 million tonnes (mt). Though Bangur anticipates shortage of labour, companies like Larsen & Toubro do not anticipate any such issue and said they could ramp up operations to the pre-lockdown levels.

Others, like JK Lakshmi Cement, added that they would take a call on restarting production closer to the date and once they have clarity. “After withdrawal, a minimum of 15 days would be required to streamline operations. Further, recovery is expected to be gradual as it may take longer time for labour to return,” read a YES Securities note after an interaction with stakeholders in the cement sector.

According to Kamal Nandi, executive vice-president at Godrej Appliances, the company is in regular touch with its workforce — many of whom are dispersed across the country. “We are continuing with virtual training of staff and are coordinating with them. Many of them are scattered as many have gone back to their hometowns. However, we are keeping ourselves prepared so that as soon as we get the green light from the government we can resume production.”

Key contract manufacturers like Flex, Foxconn, Wistron and Dixon, are pushing for resumption of production activities from April 15. “We expect the authorities to come at a decision by Wednesday. Meanwhile, we have requested them to also consider allowing sale of electronics items through e-commerce channels. Resuming production will be challenging, given the fact that the entire supply chain and labour market is in disarray. But we are fully prepared to resume production in phases if the authorities allow,” said Avneet Singh Marwah, CEO, Superplastronics.

B Thiagarajan, managing director at Blue Star, too, said his firm was prepared to resume production. “We may have to begin with 30 per cent capacity and then scale it up, like it happened in China,” he said.

In the past few months, India’s gross domestic product (GDP) declined because of weak growth in manufacturing and construction. ‘The country’s growth is likely to hit a 30-year low of 2 per cent in financial year 2020-21 (FY21) as economic recession grips the global economy, following Covid-19 outbreak, Fitch Ratings said in its latest report. The rating agency in its previous report had projected India’s GDP growth for FY21 at 5.1 per cent, lower than 5.6 per cent estimated in December 2019.

State-owned Steel Authority of India (SAIL), which continues to face labour issues, is looking to pull down its inventory after the lockdown ends.

“Our inventory has gone up several fold. It is a big concern as there is no labour to lift it even if we send the material via rails,” a senior official said.

After lockdown, we plan to have strong MoUs with our existing clients to keep our order book intact for FY21. If not higher, we target the level we saw last year at least. This should help bring down inventory to some extent,” a senior official said.

JSPL’s Sharma, too, is optimistic. “In the coming months, the whole world will look towards India as the alternate manufacturing hub. They (the world) have realised their over dependence on China is costing them dear. We will now see several collaborations with Indian manufacturing firms for machinery and equipment.”