Lockdown relaxation: Why biggies able to resume operations but smaller firms still stuck

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Published: May 13, 2020 12:01 AM

No firm can start operations unless the local DM permits, leaving smaller firms in an endless wait

Similarly, an auto manufacturing unit in Chennai got permission to operate after a week's time after applying. Similarly, an auto manufacturing unit in Chennai got permission to operate after a week’s time after applying.

On Tuesday, Maruti Suzuki India restarted production – on a low scale though – at its Manesar plant in Haryana. The company has also reopened around 600 of its dealerships. Other auto players like Hyundai, Hero MotoCorp, Bajaj Auto, and Mahindra and Mahindra, have also taken similar baby steps after the government allowed operations in non-containment areas with a set of SoPs and social distancing.

However, even as such rebooting is happening the experience is not uniform and all that pleasant across the country. The bigger and well-networked companies have managed to move ahead in a slow but steady manner but for smaller players the pain is greater. Reason: Covid-19 has in a way brought back some form of licence-permit raj and the district magistrate has become the new all-powerful officer holding unlimited discretionary powers. The smaller players, who also happen to be vendors to bigger players in several cases, are finding the going tough in such an environment.

Companies need to seek permission from the local administration – the office of the district magistrate – by submitting a host of information. Apart from the process being tedious and time-consuming, the final decision rests at DM’s discretion.

Manufacturing plants have to first fill online a detailed form informing how many people will come to the factories, how many cars will come, what kind of sanitisation has been done at the units, from which areas will the workers come, etc. Some get approval fast but many get stuck for several days.

And this cumbersome process is not only limited to manufacturing units. It even applies to corporate offices in places like Gurgaon. For instance, a small e-commerce unit in the city, which employs around a dozen employees, applied for permission immediately after May 4 but was able to get approval only recently. It first filled the online form, then after two days some new fields were added, so a fresh application had to be made and then there was a waiting period.

Similarly, an auto manufacturing unit in Chennai got permission to operate after a week’s time after applying. Its vendors are still to get permission.

In such a scenario, companies are starting work with whatever they can and wait for the circle to get complete with the passage of time. Arjun Jain, whole-time director and business head of electrical-electronics division of Pune-based Varroc Group, among the largest suppliers to Bajaj Auto, has resumed operations with what is maximum possible rather than wait for the entire supply chain to come online. “It is a huge task,” Jain said. “We have about a week’s inventory available at the plant, but if companies do not ramp up after a week, we will be under extreme stress,” he said.

Sourcing parts is the main challenge. Asheet Pasricha, joint MD, Trinity Engineers, points out that automotive OEMs cannot make the vehicle even if one part is missing, and sourcing them is a challenge. Trinity is a forging company supplying forged parts directly or indirectly to virtually all the players in the automotive industry.

Vipin Sondhi, MD & CEO, Ashok Leyland, also said it still remains a challenge for the industry to resume operations. “While the OEM production unit might be in the green zone, even if one ancillary unit that supplies a small part happens to be in the red zone, it will make a component of the vehicle unavailable, thereby making the production process impossible,” said Sondhi.

In Gujarat, several traders are finding it hard to use the online systems for approval as they are not tech savvy.

Hiren Gandhi, owner-Hiren Trading Company engaged in agro commodities, said that small traders in supply chain are not digitally literate and are demanding that some off-line facility be made available for important permissions as well as passes.

Piyush Tamboli, chairman and managing director of Bhavnagar based Investment & Precision Casting Ltd (IPCL), said that biggest challenge his unit is facing is implementation of social distancing norms. While the company is learning to function in the current situation, another challenge is getting various permissions from authorities. IPCL employs 840 employees, but currently hardly 200 are at work.

Arvind Goel, MD and CEO, Tata AutoComp Systems in Maharashtra, said while there was clarity at the top level of government, it was not the same at the ground level as the local tehsildar and police were interpreting things differently making it difficult for units to start production.

Also, one of the major concerns for the companies is that they would have to shut down their factories for an indefinite period even if one worker tests positive for coronavirus. “Many companies do not want to take this risk,” a senior official of a large Kolkata-based manufacturing company said.

Down south, in Tamil Nadu companies have been advised to function only with local workforce as transportation of workers within the state or elsewhere is completely banned.

(With inputs from Geeta Nair in Pune, Mithun Dasgupta in Kolkata, IR Ravichandran in Chennai, and Jyotsna Bhatnagar in Ahmedabad)

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