BACK TO THE WALL
India Today|May 10, 2021
INDIA’S 63.4 MILLION MSMEs, ALREADY BATTLING LOW DEMAND, ARE ON THE BRINK OF FORCED SHUTDOWNS THANKS TO A SECOND LABOUR EXODUS, HIGH COST OF INPUTS AND LOAN-REPAYMENT BLUES
M.G. ARUN & ANILESH S. MAHAJAN

THE CONCERN IN PRAKASH PADIKKAL’S VOICE is quite palpable. Padikkal, 65, owns Havistha Steel, a company in Navi Mumbai that makes equipment and storage tanks for the chemicals, food, and pharmaceutical sectors. Classified as an essential business, Padikkal is allowed to keep work going, exempted from the restrictions in place in Maharashtra, which were just extended from May 1 until May 15. Nonetheless, he says he faces a financial squeeze, with low demand because of various Covid-19 lockdowns across India on the one side and rising input costs on the other. He says prices of one input—mild steel—have shot up from near Rs 40 a kg to about Rs 85 a kg, and that he is stuck with the loss since many of his contracts use fixed prices.

Padikkal’s plight is the norm for the owners of MSMEs (micro, small and medium enterprises) in the states impacted most by Covid 2.0, including Maharashtra. These states have announced increasingly tight restrictions following the latest wave of cases, and on April 26, the Centre advised the states to implement even stricter movement bans and to prevent the opening of shops and marketplaces for the next two weeks. Although Prime Minister Narendra Modi, in a televised address on April 20, said that lockdowns should be the last resort, authorities don’t have too many options. Karnataka has imposed a two week curfew starting April 27, only permitting the sale of essential goods, and that too, from 6 am to 10 am. Delhi went into a week-long curfew the evening of April 19, which was then extended another week. Many other cities, such as Bhopal and Indore, also have curfews in place to contain the spread of the virus.

DIRE STRAITS

In Maharashtra, which contributes 15 per cent to the country’s GDP, industries that deal with essential goods or have export commitments have been exempted from some restrictions. The state also seems to have taken a lenient view to enforcement, allowing many MSMEs to operate as long as they prevent overcrowding and do not need large numbers of workers to be ferried around regularly. (As per the MSME ministry’s 2020-21 annual report, Maharashtra has 4.7 million MSMEs.)

Nonetheless, industry leaders highlight serious business woes. “The problem is that no one is operating anywhere near optimum capacity,” says S. Jaya Prasad, who runs a metals business in Thane. In states such as Punjab, MSMEs are struggling to remain open as workers flee to their home states, fearing that major lockdowns are to come. In Surat, Gujarat’s textile hub, power loom operators say production has taken a 40 per cent hit as international demand falls and migrant workers from Uttar Pradesh, Bihar, Odisha, and Andhra Pradesh return to their home states. “Workers fear a national lockdown after the West Bengal election,” says Dharmesh Kachiwala, owner of J.P. Kachiwala Textiles, a supplier to larger garment makers who export to retailers such as the UK’s Marks & Spencer. He says the garments business had just begun to return to normal after a lackluster Diwali, with online sales picking up when the new wave of Covid cases hit India. He adds that overseas orders have fallen again, by 30 per cent.

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