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This is an archive article published on April 17, 2020

From Tamil Nadu’s MSME heart, a cry for help: We’re in crisis, need a proper plan

Shanmugavelayutham has two units, one in the city and the other in a suburb, and about half his workers are North Indians who left for their states just before the lockdown.

coronavirus, coronavirus news, covid 19 tracker, msme sector, coronavirus impact on msme sector, msme sector lockdown effect, nirmala sitharaman, indian economy, msmes in india, indian economy, india ecnomic slowdown, Tamil Nadu, which has India’s second-largest economy, is home to nearly 10 lakh Micro, Small and Medium Enterprises (MSMEs), the most among all states in the country. (File photo/representational)

Some 140 workers of A Shanmugavelayutham’s electrical transformer manufacturing unit in Guindy Industrial Estate in Chennai may have to go without pay for this month. Shanmugavelayutham, 70, said he had managed to pay wages for March in spite of the lockdown having begun.

“But with no operations for the entire month, I cannot do the same for April,” he said.

The guidelines issued by the Home Ministry on Wednesday allowing “select necessary activities” from April 20 do not help, Shanmugavelayutham said — the government, he said, appeared to be “totally clueless” about their situation.

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Shanmugavelayutham has two units, one in the city and the other in a suburb, and about half his workers are North Indians who left for their states just before the lockdown.

“The rest are people from Chennai and the neighbouring districts,” he said. “But we are confused about opening on April 20 — whether workers would be able to travel from their homes, whether lorries with materials will run or not… There is no clarity in the circular.”

According to Shanmugavelayutham, the government should either use the Employees’ State Insurance (ESI) to pay the workers, or help industries by clearing all their pending payments. Rs 10 crore is owed to him for supplies he made to the Tamil Nadu Electricity Board (TNEB) alone, he said. “Now, only limited materials are left, even if there are orders to repair transformers in the state.”

Tamil Nadu, which has India’s second largest economy, is home to nearly 10 lakh Micro, Small and Medium Enterprises (MSMEs), the most among all states in the country. Each of these MSME units dotting the industrial clusters in the urban and rural areas of the state employs between 10-20 and over a hundred individuals.

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Most MSME owners and industry leaders The Indian Express spoke with, agreed with Shanmugavelayutham that the Home Ministry’s plan for a phased exit from the lockdown after April 20 lacks an understanding of the complex ways in which these industries work, and is unlikely to be helpful.

According to the circular, “manufacturing and other industrial establishments with access control have been permitted in SEZs, EoUs, industrial estates and industrial townships after implementation of SOP for social distancing”, besides the “manufacture of IT hardware and of essential goods and packagings”.

In the automobile belt of Sriperumbudur, which is sometimes called the “Detroit of Asia”, representatives of top automakers said that with production networks and key industries paralysed by the lockdown, they were trying to figure out how the government’s plan might work.

A top Hyundai official welcomed the “exit measures”, but added that the company cannot begin active operations without supporting industries and the availability of materials.

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A spokesperson for Ashok Leyland said most of the company’s workers live close to the plants, and units could resume operations — however, “supply chain will be a challenge as borders are closed, and goods movement has just commenced”.

But “whatever is in the pipeline, we will be able to receive”, the spokesperson said — adding that despite the domestic market shutting down during the lockdown, they would deliver existing orders, and build up a minimum inventory for the company’s new launches, especially of the BS-VI variants.

Industrial Estate Manufacturers’ Association leader K V Kanakambaram said their problems began much before the coronavirus outbreak — from the demonetisation exercise of November 2016, followed by the implementation of the GST regime in July 2017.

“We have been pleading for help, and we have been running our businesses by pledging jewellery and properties. The corona disaster is the last straw… Without operations, no units will be able to pay salaries next month. Only if industrial operations are allowed in the city in a phased and safe manner, can those in the rural areas work. An owner of a company in the essential sector opened his unit on Wednesday, but not a single worker could reach work,” Kanakambaram said.

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His prescription: “The government should release pending payments, and banks should give us term loans since our 40% collateral security is also with them. That may be the only way to pay wages and start operations.”

Mohan C K of Tamil Nadu Small and Tiny Industries Association, which is a consortium of about 150 associations representing thousands of small and micro industrial units across the state, said: “You (the government) ask plumbers and electricians to work, but retail shops that sell materials won’t be open? You ask SEZs, EoUs, industrial estates and industrial townships to operate while not talking about transportation of workers to these units. The country is in a lockdown for over 21 days now. You cannot expect small industries with 10 or 20 workers to provide vehicles for their workers or give them accommodation on the premises… Even if big companies open, how can they manufacture without raw materials and ancillaries that come from the MSMEs?”

Mohan also said that while social distancing norms can be implemented in manufacturing units if there are proper guidelines, the government should understand that 75 per cent of micro industries — which contribute not less than 50 per cent of the GDP — are already operating with a limited workforce of mostly 10-20 workers each.

“Remember, we were struggling even before corona hit us. You cannot simply ask industries to start operations without considering other factors. We need a solid plan to begin operations in a phased manner. Salaries have not been paid, many workers have gone to their homes in faraway states… We need a plan,” Mohan said.

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K E Raghunathan of the All India Manufacturers’ Organisation (AIMO), said cash flow management, restarting machines, staffing issues, and the servicing of existing loans, are going to pose major challenges to industries after the lockdown is lifted.

“The government should release all pending payments to industries such as GST refunds, TDS refunds, outstandings etc, and postpone all receipts from them for the next six months such as GST, EMI, interests… MSMEs are in a huge crisis now,” Raghunathan said.

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