COVID19 has created havoc worldwide and shut-down followed by the outbreak has forced many companies to suspend their production. This challenge is completely different than the economic crisis of 2008. Currently, many industries are facing a survival crisis. This crisis is more severe for the small and medium scale industries.
The automotive sector which was already struggling due to the transition from BS-IV to BS-VI has taken the biggest hit. We interacted with Adv. Appasaheb Shinde of Pimpri Chinchwad Chamber of Industries, Commerce, Services, and Agriculture in Pune who believed that timely measures taken by the government can save the MSME and auto sector from collapse.
Supply Chain Disruption Due To COVID19
The COVID19 had already shut down industries in China after December. Wuhan in China which was the epicenter of the outbreak is known as the Motor City of the world and exports auto components globally. The outbreak has caused the shutdown of industries in China, which further led to supply chain disruption in the auto sector.
While talking about the impact of the COVID19 outbreak and followed supply chain disruption in the auto sector, Shinde said that the auto industry was already struggling since January because of supply chain disruption from China.
Many vendors and businesses have not received their payments of the January yet. We believed that everything will get settled down in March but the situation has worsened because of the spread of the disease here in India
Salaries of Workers
The government has asked companies to not cut down the salaries of their employees and laborers and as per the request by the government, many companies have paid the salaries for the month of March. However, Shinde said that if the factories remain close for the upcoming months it will be difficult for the owners of the factories to pay the salaries of the employees. Shinde was the one who led many small industries in the crisis of 2008. With the constant efforts and he was able to get back the money which was not paid by big auto OEMs to small vendors in Pune. Shinde believes that whatever is happening now is unprecedented and the situation is not in the control of anyone.
BS-IV to BS-VI
For the auto industry, the Supreme Court has ordered the ban on the sale of BS-IV vehicles after 1st April 2020. The deadline was increased because of the constant follow-up by automobile associations. Talking about the issue of this transition Shinde opined, “This newly increased deadline will not help the sector much and if the government really wants to help the people they should ask SC to increase the deadline at least by a year.”
Adding to it he said that the increased prices under BS-VI will lead to a further decline in automotive sales as people will not have much money to buy vehicles after the crisis. Small vendors in the automotive sector are also in problem due to this crisis and Shinde said that they cannot even ask OEMs to help their vendors because OEMs are also in the crisis.
Call to Government
Shinde suggested that the government should do something for the MSME sectors like providing zero-interest loans to deal with this unprecedented situation. RBI has recently, reduced the Repo and Reverse Repo rate for the banks. Shinde said that this has led to increased liquidity with the banks and this amount should be given to the industry for paying wages of their employees or sustaining their business. He wants the government to make rules and regulations for this lending exercise so as small companies will also get loans.
The Pimpri Chinchwad Chamber of Industries, Commerce, Services, and Agriculture has written a letter with all their demands to veteran leader Sharad Pawar. The organization believes that many ministers in the state are currently busy with the management for stopping the speared of COVID19 and thus they have written to Pawar for their demands.
They believe that Pawar will make their demands reach the central government and the central government will address it accordingly. Shinde believes that if the government takes the financial measures properly it will definitely help the sector in this crisis.
“The situation is very grave and if shut down continues for the next few months it will have devastating effects on the economy”, therefore Shinde believes that the government should take the appropriate and timely measures to save the economy.
Comment List