BENGALURU | CHENNAI | HYDERABAD: Being able to open its units has not brought much cheer to Chennai’s Callidai Motor Works. The maker of healthcare-related products is unable to resume production because of constraints over the supply of raw materials.

A broken supply chain has hit small and medium industries across the southern industrial belts. “We can do little except dusting the machine and cleaning the place,” rued Bhargav Sundaram, the chief executive at Callidai. “Mere permission to reopen does not work. The government has to fix issues such as raw material supply, transport and labour.”

He has been unable to access components, not just from places like Bengaluru and New Delhi, but also from within Tamil Nadu. Hubs like Coimbatore and Madurai too have been beyond his reach.

Electronic-device makers in the region that are still getting supply say it is in dribs and drabs and at unbearable costs. International carriers, they say, are charging exorbitant rates to transport components from places such as Europe, South Korea, Japan and Taiwan.

“It is almost four times the normal rates,” said Sudipto Gupta, a member of the Karnataka Investment Promotion Task Force and the India head of a global electronics manufacturer.

While one set of electronics units, primarily the small and medium enterprises, are hit by either low or no demand, some large manufacturers that are sitting on piles of orders have not been able to operate at full capacities, as lockdown regulations prevent them from allowing more than a third of the workers at a time. Janaardhan R, the managing director at Hyderabad-based electronics manufacturer Treudd Circuits, said he has had no orders from ecommerce portals in the past two months. Exports have also come to a standstill.

“We have not received enough clarity yet on the special funds dedicated for the MSME sector,” he said, and added he was now looking more at stepping up domestic sales.

Former Infosys CFO V Balakrishnan, who runs online lending firm Billionloans, said lack of working capital was hitting micro, small and medium enterprises hard.

“The new restrictions allowing only fewer people at workplaces due to the Covid-19 pandemic is also resulting in higher operating costs at a time when demand is less for such small and medium companies,” he said.

MSMEs across Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana are dealing not just with issues related to raw material and working capital, but also a sudden shortage of skilled and semi-skilled workforce after the exodus of migrant workers back to states like Uttar Pradesh and Bihar. Many are affected also by a cutdown on spending by states, which are hurt by lower tax revenue and increased healthcare expenses amid the pandemic.

Kinetic Plastics, a Hyderabad-based maker of products such as roadblocks and water tanks, is among thousands of industrial units staring at a bleak future because of the lower spending by governments. Promoter T Sudhir Reddy said projects like roads, bridges and irrigation assets are the lifeline for units such as his. With the focus drifting away from infrastructure projects, most small and medium units that operated at peak capacities before the outbreak of the pandemic are now operating between a third and fifth of their capacities, he said, and added the government could bail them out by slashing the rate of interest to about 6%, at par with global trends.

Small units have been beset by money, manpower and material constraints, said KE Raghunathan, a former president of the All India Manufacturers Organisation, referring to receivables from customers and costs such as dues to suppliers, loan repayments, salary bill and PF/ESI remittances.


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