Delay in local clearances, incomplete supply chain and closure of front-end sales, key reason for firms in a wait and watch mode
The government may have given a green signal for restarting some segments of industrial activity in a staggered manner from Monday by following a set of listed protocols, but large sections of manufacturing industry, barring the ones dealing in essential commodities, are still in a wait and watch mode. While some states like Delhi, Maharashtra, Tamil Nadu, Karnataka and Telangana, have extended the lockdown and are yet to give the necessary permissions to operate, companies are also adopting a cautious approach and are not in a hurry to commence production. Some, like in the auto sector or durables, don’t see any reason to begin operations unless the full supply chain is able to function.
As a result, the auto cluster in the NCR region (Gurgaon and Greater Noida), Tamil Nadu (Sriperumbudur), and Maharashtra (Chakan-Talegaon-Ranjangaon), will continue to be shut for some more time as manufacturers like Maruti Suzuki India, Hyundai Motor India, Honda Cars, Mahindra and Mahindra, Bajaj Auto, and Tata Motors, are yet to take a decision on restarting operations. The reason is either some local permissions have still not come or the supply chain needs more time to get activated.
Says Maruti Suzuki India chairman RC Bhargava, “We are still assessing whether we need to restart operations. It makes little sense to start without assessing whether our vendors can function or not.” Mahindra and Mahindra, MD, Pawan Goenka told CNBC TV18, “We don’t have any requirement to open our automotive plant immediately and none of our plants fall in relaxed zones. Our suppliers are also in the red zone.”
Two-wheeler manufacturer Hero MotoCorp has categorically said that it will not start production before May 3, the period till when the lockdown is in force. Chennai-based TVS Motors is awaiting clearances before commencing operations.
Similarly, mobile phone manufacturing units are also yet to start operations as they are awaiting permission from local authorities.
Indian Cellular & Electronics Association (ICEA) chairman Pankaj Mohindroo said, “It will take time to gear up, about 7-10 days, but the mobile phone companies are going to restart manufacturing. Necessary permission is to be given by the state governments and that process is going on in UP, Haryana, Tamil Nadu, Andhra Pradesh, Telangana and Karnataka. Mobile industry is geared up to start. If requisite permissions by states come then we can expect manufacturing to start by maybe end of Apri.l”
Consumer Electronics and Appliances Manufacturers Association (CEAMA) president Kamal Nandi said, “I think most of the brands have enough stocks in their warehouses as well as with trade partners so I think in starting manufacturing now, the challenge would be where to ship out the stock. Therefore, in order of sequence, unless the market opens up and sales start, I do not think manufacturing activity will start in a big way”.
There are a few companies which have partially resumed operations like Thermax and Forbes Marshall. Thermax had commenced operations at its facilities at Paudh (Maharashtra) and at Dahej and Jhagadia (Gujarat) since April 6 as it was classified under essential services. MS Unnikrishnan, MD & CEO, Thermax, said, “We are currently operating between 25 to 40% of the capacity. We are experiencing constraints in terms of material and labour movement stemming from the lockdown. However, we are able to manage dispatches with necessary approvals from concerned government authorities. Right now, the focus is on safeguarding lives over anything else”.
Naushad Forbes, co-chairman, Forbes Marshall, said they had re-started manufacturing in one of their units in a limited way. Forbes said the main constraints are that there are lots of last mile delivery issues. “Though permitted, getting people transported to work is a challenge as each policeman interprets the rules himself – the main challenge is logistics and transport of material and getting the supply chain operating.”
Similarly, in Kolkata, Birla Corporation, the MP Birla Group’s flagship, said it has received permission to re-commence operations at most of its cement plants. Accordingly, the mother plants are gearing up for production. However, it will take a few days to come fully on stream – for workforce mobilisation, logistics and supply chain restoration. “Ramping up production is less of an issue – the key variable is demand – which may take some time to gain traction and based on how construction activity picks up post lockdown,” Birla Corporation COO Sandip Ghose told FE.
B Thiagarajan, managing director, Blue Star India, told FE that it can resume operations in factories only once retailers are opened. “I do not need material because enough is in the field. My warehouses are full, around 80 trucks of mine are waiting all around the country since the lockdown came into effect, so only if the retailers are allowed to open, there is point of me manufacturing.”