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vsplusonline · 5 years ago

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‘Covid-19 the last nail in the coffin, this is the gloomiest time ever,’ say MSMEs

New Post has been published on https://apzweb.com/covid-19-the-last-nail-in-the-coffin-this-is-the-gloomiest-time-ever-say-msmes-2/

‘Covid-19 the last nail in the coffin, this is the gloomiest time ever,’ say MSMEs

Jayanth Mutha, a Bengaluru-based second generation entrepreneur running a business of manufacturing agri-electrical products, is in a contemplative mode these days.

The whys and hows of joining his family business constantly nudge him at a time when small businesses are especially struggling to survive in the midst of the Coronavirus outbreak. His company, Himlite Products, is his family business of agri-electricals for the farmers and the farming community.

Mutha has reasons aplenty to second guess his choice of profession.

Locked units, dead stock, no sales, demanding vendors, uncollected payments and mounting expenses – Covid-19 has been the last nail in the coffin for a host of MSMEs, post demonetisation and GST. Not surprising then, Mutha feels highly disillusioned at this point. “MSMEs are India’s second favourite poster boy sectors (after agriculture) and are always credited for the highest employment, great contributions and what not. But, for all the hype, this has not translated to anything concrete on the ground,” he says, evidently disgruntled with the state of affairs.

As per estimates, India is home to 69 million MSMEs with micro enterprises accounting for the majority presence in the country. The virus pandemic has clearly rattled the sector that operates on limited cash resources and huge fixed costs, which make their ability to withstand such shocks extremely difficult. Across the various domains of auto, apparel, F&B, agriculture and the like – the story remains uncannily the same for such enterprises.

Work From Home – what’s that? While a plethora of industries shifted their work practices to ‘Work from Home’ during the 21 day lockdown, it has not been as simple for MSMEs for whom such a concept stands redundant and unheard of. Mutha’s typical 14-15 hour work hour day in the factory has now dropped to just one hour from home where he calls vendors and finishes off the pending paperwork.

Amit Kothari, Joint MD at Ludhiana-based Kay Jay Forgings, an auto component firm, says that since all of their processes have to be done on machines in the plants, there is virtually no work that is happening at present. “There are around 2300 people working with us, spread out in the three plants at Ludhiana and Hosur. We are paying salaries irrespective of the situation playing out right now with no sales, work or payments coming in from customers. This is the worst nightmare that the auto industry can go through right now,” he says.

The crisis has hit the auto industry hard. Dwindling sale numbers, production at a standstill and lack of supply coming in have altogether accelerated the brakes on any momentum in the sector. Moreover, the Chinese city of Wuhan, where the virus is said to have originated, is a major manufacturing base of auto components and India’s import dependence on China for key parts only implies that the supply chain will majorly be affected going forward.

Kothari doesn’t mince his words when he says that a lot of challenges are in store ahead. “The impact will go on for two quarters. It is not as if things will be completely normal when the lockdown is lifted. No one knows anything about the future,” he adds.

Kay Jay Forging plant in Ludhiana during normal operations.

In the light of the ongoing challenges, industry body Chamber of Industrial and Commercial Undertakings (CICU) has requested the Government to pay 10% lumpsum compensation to the industry based on turnover as per the GST return. “Even last year was a bad year for the auto sector. Everyone was banking on this year and invested thinking that things will look up. But now this crisis happened. The government should give some relief from the current situation. The industry is very depressed,” Upkar Singh Ahuja, President, CICU says.

Worse situation than any other Textile players too have seen the sudden shift in demand as the focus quickly moved to essentials, an area where textile items did not quite fit in. Nitesh Jagota, Joint MD of Youngman Woollen Mills, which manufactures and supplies a variety of blankets, talks about the various fixed charges that continue for their industry and is burdening them at this time. “We have about 1500 people employed in our three manufacturing units. We have paid advances, salaries and electricity charges. The industry would like to see that at least the minimum charges should be set off for now. We can survive this way for the next 1.5 months or so. However, after that, some booster from the government will be needed for us to stay afloat,” he asserts.

With all the time at hand, Jagota busies himself these days with reading biopics to keep the positivity and inspirational quotient alive. Currently, he is engrossed in reading about the life of Steve Jobs. He recalls the previous instances of demonetisation, GST and recession when the economy was also going through a slump, but is convinced that this is the gloomiest time that has ever been seen.

“Yes, there was panic during demonetisation and GST as well. But atleast things were moving at some pace. We could manage something by talking to suppliers and things were getting restored in some way. Here, we are absolutely stuck and confined to our homes. How can you do any work from home when it is all manufacturing centric?” he questions.

Better preparedness for eventualities Needless to say, it is a tough time for the several small businesses that run on stringent budgets and resources. However, it has also been a learning lesson for many of them to deal better with such unforeseen shocks that may come their way. The MSMEs that ET Digital reached out to say that though their capacity to absorb such economic upheavals will still be limited, some aspects can be thought of for better preparedness in the future.

Mutha, for instance, says that contracts should include certain safeguard clauses in the case of unavoidable circumstances. “A lot of export orders will get cancelled now as the contract never took something like this into account. We need to be more prepared for the unseen and the liability for that cannot be on the seller. Secondly, every MSME should take out atleast a year’s wages and invest the same in a contingency fund, which could either be a land or a safety investment,” he adds.

Adding to Mutha’s views, Ahuja of CICU highlights that keeping a war chest or a cash bank for such situations will come in handy. “It is necessary to keep some funds aside. Another good practice would be to keep businesses lean,” he says.

Experts also suggest that since the availability of skilled labour will be an issue post such migration, MSMEs need to invest in low cost automation to tide over skilled labour issues. Low cost insurance to cover special situations for business losses was another idea mooted.

For now, however, MSMEs are in for a long haul where the road to recovery is bound to be slow. Expectations soar high around a bailout package by the government which can offer relief to the sector in such pressing times and — more importantly — make them survive.

As Kothari of Kay Jay Forgings puts it, “Whoever survives these dark times will have a bright future.”

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vsplusonline · 5 years ago

Text

‘Covid-19 the last nail in the coffin, this is the gloomiest time ever,’ say MSMEs

New Post has been published on https://apzweb.com/covid-19-the-last-nail-in-the-coffin-this-is-the-gloomiest-time-ever-say-msmes/

‘Covid-19 the last nail in the coffin, this is the gloomiest time ever,’ say MSMEs

Jayanth Mutha, a Bengaluru-based second generation entrepreneur, running a business of manufacturing agri-electrical products is in a contemplative mode these days.

The whys and hows of joining his family business constantly nudge at him at a time when small businesses are especially struggling to survive in the midst of the Coronavirus outbreak. His company, Himlite Products, is his family business of agri electricals for the farmers and the farming community.

Mutha has reasons aplenty to second guess his choice of profession.

Kay Jay Forging plant in Ludhiana during normal operations.

Source link

#Business

0 notes