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Wednesday, June 16, 2021

Pimpri Chinchwad: Covid-hit SMEs face dearth of working capital as cash flow dries up

Abhay Bhor, president of the Forum for Small Scale Industries Association, pointed out how the past three months have seen the sector facing paucity of manpower and raw materials.

Written by Parthasarathi Biswas | Pune |
Updated: June 5, 2021 8:32:06 am
Pimpri Chinchwad: Covid-hit SMEs face dearth of working capital as cash flow dries upUnlike the lockdown last year, the sector had not seen mass scale migration of workers but around 20-25 percent of the 4-5 lakh workforce had migrated outside the state at the start of the lockdown. (Representational image)

SMALL AND medium-scale enterprises (SME) in the district are hard up for working capital even as workflow becomes regular for them. In want of working capital and mounting debts, around 35 percent of the units in the Pimpri, Chinchwad and Chakan areas can become sick units and be forced to close down.

Abhay Bhor, president of the Forum for Small Scale Industries Association, pointed out how the past three months have seen the sector facing paucity of manpower and raw materials.

Unlike the lockdown last year, the sector had not seen mass scale migration of workers but around 20-25 percent of the 4-5 lakh workforce had migrated outside the state at the start of the lockdown. Most companies were allowed to function during the lockdown.

Availability of raw materials and want of work post April had seen the SMEs pinched for cash flow. Price of steel doubled and once Covid cases started rising, a huge increase in oxygen demand had further dented the industry.

In April, the state banned the usage of oxygen for industrial purpose and instead diverted all of it for medical usages. Oxygen is used for welding and in auto ancillary-related SMEs that thrive in the automobile hub of Pune for their day-to-day operations. Thus, many of those units had to remain shut in want of oxygen.

Post May, as the demand for oxygen dipped, the state government allowed diversion of 20 percent of oxygen for industrial operations. Also, relaxation in terms of working hours and shop timings has come as a relief to many. But Bhor pointed out that the troubles for the sector are far from getting over. “The biggest concern for us is now the difficulty in raising working capital,” he added.

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The past three months had seen cash flow of the sector completely stopped as automobile sales had tanked. In want of raw material and workforce, orders in the pipeline also failed to be delivered. The minimum working capital needed to run a unit is around Rs 15 lakh, which the units are in no position to raise.

“The dead investments include government dues salaries and servicing of existing loans. For the smallest of the units, these work out to be around Rs 2-3 lakh, and without any income, the units are left to fend for themselves,” he added.

Almost 35 percent of the 11,000-15,000 units in the area, Bhor said are at risk of being declared defaulters by banks, which would stop all sources of institutional finance for them.

The SMEs, Bhor said, have requested that state government for a short-period holiday from paying government dues like electricity charges and corporation fees.

“What is necessary for the sector to survive is access to finance. At present, most banks are refusing to extend credit to the sector. The government must intervene into this,” he said.

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