COVID-19 lockdown: Most export units yet to restart, lack of SOPs in states a hurdle

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Published: April 25, 2020 4:20 AM

Even some of the food processing companies have reported that they are not getting the raw material as village panchayats were not allowing anyone to enter to procure such raw materials.

Earlier this month, FIEO had warned of 15 million job losses in the export sector if the government didn’t come out with a relief package immediately.Earlier this month, FIEO had warned of 15 million job losses in the export sector if the government didn’t come out with a relief package immediately. (Representative image)

Exporters have told the commerce ministry that most units are yet to resume operations, as many states haven’t yet issued standard operating procedures (SOPs). Also, states like Karnataka, Tamil Nadu and Telangana have not quite provided relaxations despite the home ministry’s directive on partial lifting of lockdown from April 20.

Giving its feedback to commerce secretary Anup Wadhawan, the Federation of India Export Organisatons (FIEO) has said manufacturing couldn’t start in certain “green zones” as well, as firms supplying components to them are located in the red zones.

In some cases, exporters, who had already piled up adequate stocks before the lockdown, want the inventory to be cleared before starting fresh production, given a crash in demand. Similarly, in many auto clusters, manufacturing hasn’t started as the distribution channels have not been opened yet, FIEO director general Ajay Sahai said.

“A lot of MSMEs are unable to open their factories as they lack the liquidity to purchase raw materials and other inputs,” Sahai said.

With key markets — the US and the EU — battered by the Covid-19 and over a half of their orders cancelled, Indian exporters are facing an unprecedented crisis. Merchandise exports crashed as much as 35% year-on-year in March, as the impact of the pandemic started to bite.

With a half of their orders cancelled now and the nation-wide lockdown extended up to May 3, exporters warn of a much steeper decline in both outbound and inbound shipments in April. Merchandise exports, which had already contracted by 1.5% y-o-y up to February, ended the last fiscal with a 4.8% fall to $314.3 billion.

Ravi Sehgal, chairman of the engineering goods exporters’ body EEPC India, said inadequate liquidity and logistics are the major challenges for companies to restart production. Getting workers from their homes to factories when public transport remains shut is an expensive affair. Similarly, transporting goods has been a gigantic task. “While the central bank has announced steps to ease liquidity in the system, banks remain risk-averse. So loans to exporters at reasonable rates remain inadequate,” Sehgal said. Engineering goods is the largest export segment, accounting for roughly a fourth of the country’s outbound shipments.

As such, many important industrial townships – including Mumbai, Pune, Hyderabad, Ahmedabad, Bhopal, Indore, Kanpur and Agra – continue to be in the so-called red zone, the leading exporters’ body said.

Earlier this month, FIEO had warned of 15 million job losses in the export sector if the government didn’t come out with a relief package immediately.

Even some of the food processing companies have reported that they are not getting the raw material as village panchayats were not allowing anyone to enter to procure such raw materials. For instance, the cashew industry procures raw materials through APMC but since these designated mandis are not functioning, the cashew units are finding it difficult to start production. The labour shortage is across industries and even affecting the transportation sector very badly, which is also deterring units from opening.

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