Economic support package, handholding of MSMEs need of the hour: Vipin Sondhi, MD & CEO Ashok Leyland

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Published: April 29, 2020 1:10 AM

To ensure that their health and safety are cared for, insurance for the drivers could be provided, and the working conditions for the truck drivers could be mandated through cabin regulation.

An economic support package at the very least is critical to kick-start economic activity after this long period of disruption. An economic support package at the very least is critical to kick-start economic activity after this long period of disruption.

An economic support package, resumption of supply chains, handholding of MSMEs with working capital support and interest-free loans are need of the hour to trigger economic activities post lifting of lockdown, said Vipin Sondhi, MD & CEO of Hinduja group flagship Ashok Leyland. The CV sector would see an adverse impact and reduced demand, hence allowing other sectors to reopen; an early announcement of scrappage policy would bring in some cheers to the CV industry. In an interview with R Ravichandran of FE, Sondhi said consumer demand needs to be triggered through a slew of reforms and measures: Excerpts:

How do you view the current situation and what are the possibilities you see?
We are facing a challenging situation today due to the pandemic. The economy has been severely affected and a calibrated and safe exit from the lockdown, subject to considerations being given to the geographical spread of Covid in the country, would be a practical approach to restart economic activity. An economic support package at the very least is critical to kick-start economic activity after this long period of disruption. Supply chains need to be re-started, migrant labour needs to come back to work (in a systematic and safe manner), and consumer demand needs to be triggered.

Are the liquidity announcements made by the Union government and RBI enough for the industries, particularly for MSMEs?
The measures taken by the government and the RBI are in the right direction, but a lot more needs to be done, and soon. The government will have to manage the state of the economy, especially for the stressed sections of the society — daily wage earners, the agriculture sector and the MSMEs. MSMEs will be needed to be supported even more as they are the backbone of Indian industry and form the key element of the product supply chain, be it agri-processing, textiles or auto-ancillaries. Some measures of support to be considered would be easy access to working capital and liquidity through banks and NBFCs; providing interest-free and collateral-free loans; introduction of an incentive for MSMEs to help them pay salaries and wages to their employees in these times; extension of the NPA-recognition period from 90 days to 360 days; ensuring that all pending payments to industry/MSMEs are cleared immediately by the government departments and PSUs.

What are the near- and long-term problems you see at this point of time from a CV manufacturer’s perspective?
The CV sector is expected to witness an adverse impact in the short term on account of reduced demand. The need of the hour would be to boost demand. To boost demand and revive economic activity there should be gradual opening of the other sectors and enabling employment (especially for casual, and daily wage workers).
Clear operating guidelines should be provided to ensure social distancing and preventing spread of the virus. Some of the demand-side interventions to trigger consumption (individuals, government and corporates) would be acceleration of infrastructure spend of Rs 1.7 lakh crore (already allocated in the Budget) to provide immediate impetus to the economy; a significant amount of this money can go towards to each of the 700 districts in the form of low cost housing and road construction, building agriculture warehousing and cold storage chains near farm gates.
Scrappage policy for automotives (>15 years) to incentivise new purchases. A special package is required for airlines, bus operators, hospitality, tourism and retailers. Export stimulus and reopening of port operations are neeeded. These would be some of the measures which could boost demand.

Do you see problems in the workforce, especially migrant labour?
Migrant labour need to be cared for and we should take all necessary measures to ensure that they are provided with food and shelter. In our case, our manpower is predominantly from local areas and since in the initial period we will be operating at very low levels, we foresee no problem in availability; also as we have to adopt social distance norms and health protocols we will gradually scale up and will keep with the demand.
Our contract manpower is also around premises and since we have been extending support by means of salary as well as food and healthcare, we should be able to ramp up. On resumption we will ensure that we provide mandatory health screening for migrant labourers once they report for duty; we are also setting up quarantining facilities for migrant labourers, if Covid-19 symptoms are identified.

Challenges in terms of logistics?
Logistics and transportation are the backbone of the economy, and in these challenging times, vehicles need to be running to transport essentials. Truckers ensure that the supply chain of these essential supplies are not disrupted, and the communities affected by the lockdown are cared for. We, in turn, need to care for these truckers and some measures which the government could take to assist these drivers are to provide minimum wages to the drivers, institute a driver-risk allowance for the next 6-9 months which can be charged to the customer as in service charges in a restaurant, incorporate a transport cess which can be used for their welfare.

To ensure that their health and safety are cared for, insurance for the drivers could be provided, and the working conditions for the truck drivers could be mandated through cabin regulation.

Your comments on the prospects of the CV industry this fiscal and the way forward?
While it is difficult to predict when the economy would start turning around and in turn help the CV sector, as already said, an economic support package would be critical to kick-start economic activity after this long period of disruption. Consumer demand needs to be triggered. Unless the ecosystem through the value chain opens, a truck cannot be produced or sold. After the lockdown is lifted we are going to enter into a new era of BS-VI, where customers are going to witness new-age trucks.

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