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Tuesday, April 20, 2021

The lockdown finished us, supply chain disruption remains: Delhi’s factory owners

On March 13, The Indian Express, relying on data released by the National Statistical Office (NSO), reported that India’s industrial production slipped into negative territory again in January, posting a contraction of 1.6% due to weak manufacturing, capital goods, and mining output.

Written by Anand Mohan J | New Delhi |
April 5, 2021 2:59:49 am
At Narela industrial area. (Photo: Gajendra Yadav)
  • The owner of a corrugated box-making unit laid off 25 workers who had returned after the lockdown was lifted. He shut down his unit soon after.
  • The owner of a toy-making unit shut shop and is looking for a private job. He has a loan of Rs 15 lakh.
  • The owner of a unit that makes plastic cups took a salary cut for six months hoping to keep his workers, who he has known for over two decades. But with loan pressure mounting, he recently fired 15 workers.

These are just some of the stories of small factory owners in Delhi’s industrial areas, who have had to either shut or shrink their business following the pandemic-induced lockdown.

Simranpreet Singh (38), who produces hydraulic machinery at Bawana industrial area, said sales are still not back to pre-Covid levels, indicating the distress among the plastic-making units which dot the area and are his primary buyers.

Moreover, prices of raw material have shot up – copper now costs Rs 700 per kg from Rs 250 per kg before the lockdown – said Singh. Similarly, a bundle of 2 mm electrical wires is now priced at Rs 2,500, up from Rs 1,800 earlier. “And to add to all this, my workers who left on foot have still not returned,” he added.

Factory owners also said they are no longer able to buy raw material on credit. Earlier, they would have a 30-day period to make the payment; now suppliers ask for the entire money upfront. This is particularly challenging for small units, which do not have enough cash at hand.

On March 13, The Indian Express, relying on data released by the National Statistical Office (NSO), reported that India’s industrial production slipped into negative territory again in January, posting a contraction of 1.6% due to weak manufacturing, capital goods, and mining output.

CMIE data shows that at 6.9%, unemployment in February was lower than the average of 7.3% since July 2020; however, both labour force participation rate and employment rate remain significantly lower than their levels before the lockdown and it could be a while before these move up to pre-pandemic levels.

Ritesh Sharma (29) had started a toy-making unit at Mayapuri industrial area with a business loan of Rs 25 lakh. He bought two injection moulding machines and employed a staff of 10. Six months after the lockdown hit, he had to shut shop. “I am now looking for a job at a private firm,” Sharma said.

Tajinder Singh (41) runs a plastic bottle-making unit at Anand Parbat Industrial area and his main buyers are fabrication oil industry clients. He has been working for over 20 years and has always faced a shortage of workers. During January and February, ahead of Holi, is when he finds the most work. But on February 27, he fired 50% of his staff as he did not receive orders to keep his unit functioning. Singh attributes this to the rise in the price of base oil which led to his clients in the lubricant industry, who depend on base oil for their units, slowing down their orders.

“The lockdown finished us. There is a supply chain disruption which remains due to travel restrictions in various states. I have to earn Rs 5 lakh per month to break even and there was no option but to let go of my staff. Most of them were machine operators and very skilled. If the machines don’t run, what will they do? ” Tajinder said.

The Bawana industrial area has more than 16,000 units which operate mostly in 250 sq ft spaces. Rajan Lamba, president of the Bawana Factories Welfare Association, said around “300 such units have shut since the lockdown”. He attributes this to the “imposition of an unplanned lockdown, workers leaving for their homes and lack of support for MSME units as financial benefits rolled out by the government benefited big industries disproportionately”.

Puneet Bahri, also from the association, runs a printing unit. He has not seen work in the past six months as several paper mills across North India have started closing down, waste paper supply for China has stopped, and supply chain disrupted due to lockdown restrictions. “There has been a 100% increase in the price of standard paper reels. Printing units and those working in books, corrugated boxes and other paper-related items are in free fall,” he said.

Ashish Garg, general secretary of the Narela industrial complex factory association, who owns a chemical-making unit which caters to footwear-making units, paint and ink-making units and plastic-making units in the area, said orders have dropped.

“Prices of many chemicals like titanium dioxide have shot up. These were sourced from China and due to the standoff (between the two countries), prices shot up. Many ancillary units depending on these chemicals have stopped working all together,” he said, pointing to the closure of ancillary units involved in making shoe parts, plastic waste and other units with a start-up capital of Rs 25 lakh.

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