Factory reset: Okhla MSMEs limp back, garment units still ailing

Export logistics are troubling many industries. While some are facing container shortages, others are looking at increased freight costs in key markets

A year ago, the Covid-induced lockdown had a severe impact on the factories in Delhi’s Okhla industrial area. Barring those catering to essential services, all other factories were shut, many labourers fled to their hometowns, and those who remained were left without any salary or the assurance of retaining their jobs.

But the days of empty roads, dusty, vacant trucks and desolate labour colonies are now over, and the Okhla industrial area is back in action. The roads are lined with freight carriers, crowds throng the street food vendors, and the hum of the factories is back.

According to the 2019-20 annual report of the Ministry of Micro, Small, and Medium Enterprises (MSME), there are close to 936,000 registered MSMEs in Delhi, employing nearly 2.3 million skilled and semi-skilled workers. 

Okhla is, in a sense, a confluence of MSMEs producing plastic products, garments, textiles, electric equipment, chemicals and synthetics, among others. The area is also slowly becoming a hub for start-ups such as renewable energy companies, electric vehicle makers, and so on.

“April 2020 was a bad month. Post that, the recovery has been gradual,” says Vikram Bhadauria, managing director, Alok Masterbatches, a plastic material company. “We opened up much before others as we were essential services. Our top line has grown, but the bottom line has been severely hit as input prices, freight, logistics and export costs have gone up.” 

Bhadauria says his factories in Delhi and in three other states opened by the end of April last year as they supplied plastic packaging to the medical industry. “Our export is still facing issues as freight costs have gone up due to container shortage. The phased lockdown across the world has impacted logistics globally,” says Bhadauria, who exports to Southeast Asia and European markets.

Export logistics are troubling several industries. While some are facing container shortages, others are looking at increased freight costs in their key markets. “For shorter distances, the cost is higher now. From $200-$250 per unit, the cost of transporting has gone up to $800-$1000 per unit,” says Anil Gupta, chairman and managing director, KEI Industries Limited, an electric cable and wire maker.

Bhadauria says his company expects to reach pre-Covid growth levels in another three to four quarters. However, ramping up growth above pre-Covid levels looks remote at this point.

Okhla’s electrical equipment industry is looking at a similar growth trajectory. The sector is also hopeful of the government’s boost to domestic manufacturing under the initiative of Atmanirbhar Bharat. Close to 70 per cent of the electric equipment industry comprises MSMEs.

“We are expecting a lot of demand in the coming six months as the infrastructure projects announced by the government start getting implemented. With infra projects, the demand for sectors such as cement, electric equipment, steel etcetera also goes up,” says Gupta. “The more the government spends on or awards infrastructure projects, the more growth allied sectors will witness.”

Not all are so hopeful, though. Garment and textile factories are still in the throes of losses and have a bleak future outlook.

With orders coming to a halt from May 2020 till at least September, Okhla’s garment industry had to sell rejected products at 10 per cent of the price, says Anil Varma of Monica Garments in Okhla Phase-II. Varma is also president of the Delhi Exporters Association.  
 

“First, the buyers stopped the payment, which led to a standstill in manufacturing. And then, future orders were stopped. The industry is suffering massive losses. Many of the exporters declared bankruptcy after orders were cancelled by leading clothing brands,” says Varma.

While in other sectors China’s manufacturing prowess eclipses the growth of Indian manufacturers, for the garment industry, it is Bangladesh that overshadows India. 

“We are in a hand-to-mouth situation. The garment industry is one of the largest employers in the country. Forex and imports are rising in the industry, while the traditional Indian textile industry is on a decline —  be it leather, handicraft, and so on,” says Varma. “We have been hearing about textile parks announced by the Centre, but not much has materialised. Ideally, the government should support the domestic industry and de-incentivise imports.” 

Though the industry is still counting its losses, there is a glimmer of recovery. Many of the migrant labour are back and Okhla’s labour colonies are bustling with people again. As are the factory floors, though the working style is different now, what with the masks and social distancing. Several factory owners have tried to maintain the same staff strength as before, while operating different shifts to ensure social distancing. 

“As long as I have a job, everything is manageable,” says a worker at a factory in Okhla Phase-I. The others around him agree, but also point out that in some cases, wages have fallen or the shift system is proving to be difficult. But for small industries and daily-wage earners, the mantra today seems to be — something is better than nothing.