Employees maintain social distancing on the work floor

Medico employees undergo a temperature check before boarding the company buses

In the afternoon of April 23, Thursday, more than 100 small businessmen around Mumbai and Thane met through a conference call over the online conferencing software Zoom, to discuss the reopening of businesses after the lockdown. There was a quick consensus in the meeting that went on for nearly two hours — no one is ready to restart immediately. The supply chains for raw material simply do not exist at this point, even though some units have permissions to operate and others are expecting it in early May.The meeting, organised by the Mumbai-based IMC Chamber of Commerce and Industry , had businessmen seeing May-end as a plausible date for reopening. But there was another, more startling, consensus emerging at the meeting organised to discuss a reopening playbook — at least 25-30% of the businesses would not survive the crisis created by the Covid-19 pandemic.ET Magazine spoke to a dozen businessmen from across India — owners of businesses that fit into the category of micro, small and medium enterprises (MSME) — and found that this feeling of staring at an abyss was pervasive. The biggest worry is, of course, a liquidity crunch, followed by a disrupted supply chain and labour availability. The sector employs almost 12 crore people, making a large number of the country’s households dependent on the 63 million MSME units. It also accounts for a third of India’s manufacturing output and 45% of exports.Many units have paid their workers wages for March in full and are prepared for April payments. While there are no revenues now, there is a government mandate to keep paying salaries and wages. There are other bills like electricity and water that also have to be paid. But without revenues or substantial government support, there is no way they can carry on in May and beyond. “Wages and salaries are the biggest issue, and everyone is sweeping it under the carpet,” says Ashish Vaid, president of the IMC that is also a federation of 170 industry associations from western India.Vaid, himself a realtor with annual sales of Rs 200 crore, says all MSMEs should be eligible for bank loans equivalent to three months wages at repo rates. Multiple industry associations, including the Confederation of Indian Industry, have petitioned the government for a bailout package for the MSME sector (essentially all businesses with capital investments up to a maximum of Rs 10 crore).Apart from loans to cover wages, there are othercommon requests like suspension of contributions to employee’s provident fund and Employee State Insurance Corporation ESIC ) for six months. Some demand that there should be a clawback of GST that has already been paid. Easier access to bank loans, especially at low rates, with help from the state and central governments, is another common theme, as is a moratorium on repayments for six months and a 25% increase in working capital loans. Seeking more loans and a simultaneous moratorium on repayments are also a sign of underlying desperation in the sector.Take first-generation entrepreneur Raja Shanmugam of Tiruppur. His 31-year-old knitted T-shirts manufacturing unit Warsaw International employs 650-800 workers. At least 150 workers are currently lodged in the company’s hostels at Tiruppur. It is a labour-intensive industry and the annual wages bill is almost 30% of sales. Payment from his Indian as well as European buyers stopped in March, and Shanmugam has not been able to ship completed orders either. He wants the government to use ESIC money to take care of the workers’ wages from April onwards.DK Aggarwal, president of PHD Chamber of Commerce and Industry, an association of MSME organisations across states, says restarting units won’t be easy because of the liquidity crunch that the sector is facing. “Cash flow has stopped.After paying April salaries, all MSMEs will be hand-to mouth.Plus, there will be no demand, and workers would have also left for their villages.”Reopening plants in May could lead to revenue flows restarting. But things won’t be so smooth. While there is general consensus that businesses should pay their workers through the lockdown, there are several restrictions on the use of the same workforce once a factory reopens.Strict rules for social distancing while reopening are not viable for manufacturing units, especially MSME units that have small premises. Nayan Patel, a former president of IMC, explained that his own business, which makes motion control devices, needs a 150-member shift, with multiple processes, that cannot operate with fewer people.The layout and configuration of machinery and workstations are such that it cannot be done. Many from across the country echo Patel’s view. For Jaipur-based switchgear maker Anil Saboo, the biggest worry is labour shortage, as many employees have left for their states in eastern India.“There are 15 men living inside my factory today, but the moment the lockdown is lifted, they want to leave for home,” Saboo says.Gurgaon-based Dev Goel, who runs a package substations and switchboard plant from Manesar, sees a big worry in maintaining social distance inside the factory while labourers work as welders, or lift large items. There was a fear of police action and FIRs being registered against factory owners if these norms were not followed and negligence led to Covid-19 infections in workers. The central government clarified last week that no businessperson will be arrested for workers getting infected with Covid-19 after reopening. However, restrictions have created impediments. Goel said almost 95% of the members of the Manesar Industries Welfare Association have decided to wait and watch and not rush into reopening their plants, in spite of having permission to restart.Or, take the case of Chetanbhai Makwana, who runs a medicated soap manufacturing unit at Gheekanta, Ahmedabad. Makwana had started his soap unit as an essential service, with 20% staff, but had to shut it down on Friday as only one worker turned up for work.Apart from cash crunches and labour dislocation, there are serious supply chain and regulatory issues that have affected the MSME sector.For instance, permissions to restart operations do not come easily, even if you are deemed as an essential service. Amit Seksaria, managing director of RRL Steels Group in Kolkata, says he received a letter from Coal India on April 8, asking him to restart operations. His unit makes ground engaging tools for coal mining and hence is deemed to be an essential service linked to the power sector. However, his application for restarting, filed with the state government, is yet to elicit a reply. While one of his units is in a Covid-19 hotspot, the other one is in a rural area. Seksaria also exports to the Netherlands and Spain and export consignments have been loaded on containers at his factory near Kolkata for orders from these countries. “I am receiving urgent missives from my European buyers but I am not able to send these containers to the Haldia port, which I am told is operating,” Seksaria says.An injection-moulding unit owner in Daman said he is in a similar predicament, as he manufactures packaging material for the pharmaceuticals industry, but his application for restarting his unit has been stuck at the collector’s office, while some of the larger plants have got permission. Unwilling to be quoted, he says that as a buyer of polypropylene from very large petrochemical companies and a supplier of bottle caps to big pharmaceutical companies, his cash flow is usually squeezed as he has to buy with cash and supply on credit. The crisis has aggravated his problem.In large parts of Uttar Pradesh, while there is no ban, the non-vegetarian food chain has virtually shut down. Eggs, though, are selling. Mukul Tandon, president of the Merchant ’s Chamber of Uttar Pradesh, owns a poultry business, with 75,000 eggs per day. “The retail channels have collapsed and we do not know how to sell the eggs. The industry as a whole in the state produces almost 6 lakh eggs per day. While costs are Rs 3.75 per egg, I am forced to sell them at Rs 2-2.5,” Tandon told ET Magazine.Once business is disrupted, it is difficult for smaller players to recoup and restart. Seksaria says that unless there is an opportunity to start production in May, businesses will start crumbling. Goel of Manesar adds, the lockdown may be followed by lockouts.Not every MSME business owner is pessimistic.Bhopal-based entrepreneur Kunal Giani says his motto of constantly focusing on cash flows and staying debt free has held him in good stead today. Giani started his business in rebonded foam, a raw material for mattresses, in 2011, straight out of college. Giani’s father, a banker, had taken voluntary retirement in 2006 to start the business. Bad luck struck and he died in an accident before he could start.Young Kunal completed his engineering education and took on the mantle.No one was ready to lend to a young man selling mattress foam on a bike. The company is a debt-free operation today.With sales of Rs 110-135 crore and two plants, one in Bhopal and another in Uttar Pradesh’s Secunderabad, Giani says he is in a good position to pay salaries for April. The raw material stock, chemicals imported from Southeast Asia, can also last a few months. The lockdown has, of course, impacted his plans to start a new factory in Colombo to supply the south Indian markets. It has also affected the launch of a new product, a mattress that comes in a box, priced at Rs 1,000.Giani’s firm Sarva Foam Industries is an exception.But he, too, wants to borrow today and is seeking easier access to credit. However, most small businesses in India are not built like that, points out Nayan Patel. “MSME businesses are usually a month-to-month operation, with little reserves for the future. A disruption like this might just mean restarting everything,” Patel says.Therefore, a lot of hope is now pinned on moves by the government of India and state governments. Various MSME bodies have even sought income-tax sops. Many MSMEs operate as sole proprietorship firms or partnerships, and are not eligible for the lower corporate tax rates, announced by the finance minister in mid-2019. The US has announced a $484 billion stimulus package for small businesses. The MSME entrepreneurs are hoping that Finance Minister Nirmala Sitharaman will draw some inspiration from it and announce a package for Indian small businesses too. After all, her first package of Rs 1.7 lakh crore also drew inspiration from US action. Others, knowing the Indian government has little leeway, have set their eyes on social security funds like the EPF or the ESIC. For a large and critically important sector that generates a large number of jobs and supplies components for nearly every product that we use, no easy solutions are in sight.It is 6 am when a bus pulls into Bhangel in Noida. A handful of employees of Medico Electrodes International Limited form a queue to board the vehicle provided by their employer. But first, an attender checks if they are wearing masks properly and sprays sanitisers on their hands. The bus is filled from the back — one in each seat, every other row. Except for the occasional ringing of mobile phones, the ride to office is eerily silent.Medico, which makes disposable ECG electrodes, picks up its workers from multiple locations in a 3-4 km radius around its factory in Noida special economic zone (SEZ). It takes adequate precautions. “The buses are disinfected after every trip,” says company’s CMD Amit Mehra. “So is the factory after every shift.”Before they enter the factory, workers also go through a thermal screening and hand washing-sanitising routine. They also get fresh masks are head caps.In the shop floor, they work on alternate machines to ensure social distancing.Medico, classified as an essential service unit, has been working at 50% staff capacity with 300 workers across three shifts since the lockdown. CMD Mehra has been busier than ever, juggling between video-conferencing with staff working from home and domestic and foreign clients. He visits the production floor regularly to check social distancing and other sanitation arrangements. “We give free ration to all workers every fortnight, provided additional Rs 3 lakh Covid-19 insurance cover and are providing transportation services,” he says. Regular counselling is also provided to help workers.But Mehra, who managed to run his operations through the severe lockdown, faces a serious problem as the government partly opens economic activities.An order issued on April 22 by the deputy commissioner of the district industries centre, Gautam Buddh Nagar, to provide accommodation to workers within or nearby factory has put him in a bind. “We have three days to comply with the order or shut shop. How can we make such arrangements for 250 people so fast? Besides, will the families of our 60-odd women workers allow them to stay at factories? We are a healthcare unit. Do we shut down now?” says Mehra.As such, the operations at Medico had slowed due to social distancing. During lunchtime, only one worker is allowed to sit in a table. So it takes almost three hours for the entire team to finish their meals and return to work after a round of sanitisation.The situation is almost same at the 13 essential sector units among the 250 factories operational at Noida SEZ now. As the morning shift comes to an end at Medico, workers toss the used head caps and masks in a bin, wash and sanitise their hands and wear fresh face covers. Soon they line up a metre apart to board the buses for a ride back home. All in a day’s work now.