Lockdown curbs ease but business activity remains sporadic
India on Monday started a staggered exit from the world’s biggest lockdown as curbs on economic activity in rural areas were lifted but business remained sporadic as some companies decided to wait for the complete lifting of restrictions on goods and people’s movement.
The government had last week allowed industries in rural areas and farmers as well as makers of information technology hardware to resume operations as it looked to revive stalled economic activity that suffered an estimated Rs 7-8 lakh crore of loss.
FMCG companies, like many other industries, had to face major hassles of supply chain disruption and fall in available laborers following the outbreak of coronavirus pandemic and the ensuing lockdown imposed to curb its spread, are looking to maximize production with easing of curbs.
Major auto OEMs, however, are looking to restart operations in a phased manner only post-May 3 when the extended lockdown is scheduled to be lifted. This because functional retail and vendor network are still absent, blocking cash flows.
Work from home is expected to continue for employees in the information technology and business process management industry for some more time as many states like Uttar Pradesh, Karnataka and Telangana have decided to continue with full lockdown without any relaxations.
The three states house a sizeable number of IT-BPM firms.
The government on its part looked at public sector firms for anchoring the biggest part of economic revival. To begin with, state-owned oil firms have decided to resume as many as 511 projects involving over Rs 42,000 crore of investment with immediate effect.
Oil and Natural Gas Corp (ONGC), Indian Oil Corp (IOC), GAIL, Oil India Ltd and six other public sector firms identified projects that either in rural areas or have in situ labour for the resumption of work, oil ministry sources said. These projects will involve Rs 2,210 crore of payout to suppliers and labourers in the first month and generate around 7 crore man-days of employment.
With the government allowing manufacturing-related relaxations in certain green zones starting Monday, FMCG companies hoped this will help them indirectly in restarting activities in industrial clusters. But, full ramp-up of the supply chain may take 30-40 days, once the lockdown is fully lifted.
Consumer goods companies are expecting to ramp up production capacity to 60-65 per cent from current levels of 40-50 per cent.
While the government has permitted restarting construction activities, real estate developers continue to face problems particularly over the availability of labourers.
Most migrant laborers had returned to their native state following the imposition of nationwide lockdown on March 25. The government has not yet started the inter-state movement of laborers and so companies continue to face the problem.
Companies like Patanjali, Ruchi Soya, Dabur and Parle Products that have been operating their plants in a scaled-down manner during the first phase of lockdown with limited workforce suggested giving manufacturing permission to their several suppliers, which are mostly MSMEs and fall within the city radius, as it is affecting the smooth functioning of the supply chain.
“Factories of Patanjali and Ruchi Soya were operational even during the lockdown because we operate in food and essentials. However, there were issues regarding transportation and supply chain, etc during the lockdown, which I expect to ease out slowly,” Yoga Guru Ramdev told PTI.
According to him, Patanjali witnessed almost two to three-fold jump in the demand for its several products and expected that the supply of such products would be increased in the market going forward.
Similarly, Dabur India Executive Director-Operations Shahrukh Khan said, “Almost all of Dabur’s factories are operational today, producing a range of ayurvedic medicines, hygiene products like hand sanitizers, hand wash, and daily essentials, with strict implementation of SOPs for social distancing at offices, workplace, factories, proper sanitization of buildings, factories”.
He further said, “We are now trying to maximize production, given the supply chain constraints, and material and manpower availability”.
Parle Products Category Head Mayank Shah said that food was exempted and factories were open but at a reduced capacity of around 40-45 per cent following the restraint imposed by the government on the number of workforce.
IT companies are still awaiting clarity from a few other states to determine the future course of action.
Industry body Nasscom had advised members that where state-specific approvals come in, members should look at a staggered approach and start with 15-20 percent workforce in the first phase, and subsequently scale it up depending on the situation on the ground.
“The home ministry guidelines had allowed IT-ITeS companies to operate with up to 50 percent strength from April 20 and we had suggested member companies to take a staggered approach and start with 15-20 percent workforce in phase I, and then increase it depending on the on-ground situation,” Nasscom Senior Vice-President and Chief Strategy Officer Sangeeta Gupta told PTI.
However, states also have their own rules that have to be followed for allowing IT companies to open offices, she said, adding that Uttar Pradesh and Delhi have already clarified that no such activity will be allowed.
“Also, IT companies are just settling into the work from the home mechanism, they have taken requisite permissions from clients for this, and so I do not think they will be in a hurry to get employees back to offices and risk their health,” Gupta said.
About 90 per cent of IT employees and 70-80 per cent of BPO and small and medium businesses in the sector are estimated to be working from home to ensure business continuity.