MSMEs in logistics hit hardest by lockdown; here’s what govt can do to revive ailing small businesses

Published: April 27, 2020 2:11:24 PM

Logistics for MSMEs: According to the All India Motor Transport Congress, the daily movement of trucks has decreased to less than 10 per cent of normal levels.

Exporters are estimated to have received Rs 2,868 crore under the equalisation scheme in FY20.Road transport accounts for about 60 per cent of freight traffic in India, according to the Ministry of Road Transport and Highways.
  • By John HK Tang

Logistics for MSMEs: As the world reels under the impact of the global COVID-19 pandemic, the situation remains gloomy, forcing countries across the globe to go under a complete lockdown. The countrywide lockdown in India, though a great move to curb the drastic effects of the novel coronavirus, is crippling industries across various sectors and the economy as a whole. As the cascading effects of the pandemic continue to affect the global economy, upending trade and commerce with countries sealing borders to prevent the spread of the flu-like virus, the Indian logistics companies are finding it difficult to keep the business lines operational. According to the All India Motor Transport Congress, the daily movement of trucks has decreased to less than 10 per cent of normal levels. Road transport accounts for about 60 per cent of freight traffic in India, according to the Ministry of Road Transport and Highways.

The Impact on Supply Chain

Naturally, with many countries on lockdown, the global supply chain has virtually come to a standstill. As a result, shipments lie pending as factories and warehouses are shut in a prompt response to the global health emergency.  It remains unclear as to when the situation returns to normalcy. Before India implemented a mandatory lockdown to curb the far-reaching consequences of COVID-19, disturbances across the supply-chain management were already visible in some parts of the country. Gated societies in several cities banning access to delivery agents and work from home policies initiated early by many companies started impacting the overall delivery percentage since early March.

Though government authorities are helping in solving the impasse by engaging with stakeholders involved in the delivery of essential services, e-commerce players in B2B and procurement domains have been left stumbled. Indian Chamber of Commerce (ICC) has estimated losses to the logistics sector at about Rs 50, 000 crore. 

Tough Time for MSMEs

The trade is down, production is halted, the supply chain has been disrupted and markets are bearish. MSME segment has perhaps been the hardest hit due to the prolonged lockdown. As the economic activities come to a halt, MSMEs are grappling with problems like cash flow, low liquidity and lack of workforce. In a move to curb the economic impact of the virus, the RBI has announced a moratorium on term loans, put off interest payment on working capital facilities and eased working capital financing. Additionally, many public sector banks and Small Industries Development Bank of India (SIDBI) have also introduced emergency relief measures.

Also seen: This many MSME loans are at higher risk of becoming NPAs in next 12 months: CIBIL

While these measures have given hope to the MSME sector, there are a few more initiatives that the government can take to provide aid to the ailing business sector such as delay MSME loan repayment or extended tenure, an exemption in GST, subsidised warehouse or inventory management facilities, measures to mitigate the impact on MSME labour workforce, enhance access to credit and defer utility and social security payments.

Challenges

Major FMCG companies struggle to transport their goods due to shortage of trucks. Though the government has permitted the movement and delivery of essentials goods, accessibility remains a challenge since the logistics is not moving at a fast pace because of many restrictions in place. There is a shortage of drivers since almost all of them have moved back to their hometowns.  Unavailability of sufficient labour at loading and unloading points is also hampering the logistics operations in the country. Additionally, there is a huge number of daily wage earners who are grappling hard to survive the situation. 

What is Foreseen?

The crisis situation calls for unprecedented coordination among industry, civic authorities and the public. It is essential that regulatory authorities recognise the logistics industry as essential services to keep critical supply chains running smoothly. It is the time when companies shall assess their supply chain risks and proactively develop mitigation plans such as exploring alternate channels of transportation or combination of it – small trucks, three-wheelers, two-wheelers etc. for last-mile essential goods delivery. Regional logistics companies should build capabilities to change with the change in demand at a short interval of time.

Though times are tough for businesses, it is a temporary phase. Once business operations resume, mass hiring of delivery personnel will become a need of the hour as pending orders along with the new ones will further stress the logistic network after the pandemic. The logistics network must prepare in advance for the sudden upsurge in consumer demand once manufacturing units spurt back into action. A stronger network will be an absolute requisite to deal with the scenario efficiently. Undoubtedly, the virus outbreak and the unfortunate turn of events will act as a wake-up call for companies across various sectors to implement business continuity plans to better survive such unplanned situations in the future.

John HK Tang is the Co-founder and Director of Lalamove. Views expressed are the author’s own.

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