A struggle to keep production going
But future order book of companies looks bleak
Manufacturing in India has come to a near standstill, with companies in various sectors — such as cement, steel, FMCG and electronics — shutting down many of their plants amid the coronavirus pandemic. At some plants, only a fraction of workforce is on duty
With several states calling for a lockdown in multiple districts, it is a partial shutdown for India’s cement and capital goods sector.
While companies are yet to assess the financial losses, they do not anticipate immediate shortage or delivery issues.
Most major capital goods companies in the country have shut down facilities in districts where a lockdown has been announced.
The country ’s largest engineering conglomerate Larsen & Toubro (L&T), according to sources, has completely shuttered its Mumbai facility in Powai and is operating Hazira at bare minimum.
L&T’S Hazira plant in Gujarat is a bigger facility spread over 34,500 square metres with modular fabrication facility, as well as heavy engineering, defence and shipbuilding, and power equipment manufacturing facilities.
Executives said it is too early to assess the overall impact on operations and financial performance. Vimal Kejriwal, chief executive officer (CEO) and managing director (MD), KEC International, said that so far transportation of despatches are allowed and March deliveries will not be impacted significantly.
The company’s transmission manufacturing facilities i n Maharashtra, Gujarat and Rajasthan have now been shut down owing to local restrictions.
Others like Siemens have shut all their facilities. “In addition to the disinfecting and sanitizing our offices and plants around the country, work from home for staff and a closure of all our manufacturing facilities have been carried out. Work at some project sites have also been impacted,” said a spokesperson for the company.
In the response, the spokesperson said, “In compliance with these (regulatory announcements by the government authorities), there could be disruption in business continuity in spite of the best efforts of the company.”
Order inflow for capital goods companies are also under stress.
“There is no order finalisation happening for the last few weeks,” MS Unnikrishnan, MD and CEO, Thermax, had said last week. “Going forward, we are not expecting a full recovery to happen as nobody will want to conclude major orders,” he added.
Unnikrishnan sees this worry continuing for the next couple of quarters.
Kejriwal added that tenders where preliminary work is already done, are still being undertaken. The concern on order inflow would be for those where ground visits or negotiations and meetings are pending.
“Even if there is an impact on order inflow, stronger capital goods companies have a healthy order book to keep factories busy for the next one year,” he said.
In addition to capital goods, cement companies have shut down capacities due to local restrictions. Ultratech and Ambuja Cements are two such companies which have shut plants at multiple locations.
Executives from the cement industry, however added, the capacity shutdown will not have any immediate impact on supplies. Construction activity in several districts is also facing a ban owing to COVID -19, which has dragged down demand for the product. “Cement storage capacity is limited, and there is already stock maintained at the company, warehouse and distributor levels,” one of the cement executives added.
Another industrial facility, which lies in the heart of Mumbai is Bharat Petroleum Corporation (BPCL)’S refinery. A company spokesperson said the refinery has not cut down staff to half as the refinery qualifies for essential services.
Oil marketing companies like BPCL and Indian Oil Corporation (IOC) said that throughput from the refineries have not been scaled down so far.
Most of these manufacturing companies employ contract labour on a large scale. Executive from multiple companies added that payments to contract labour will continue despite a shutdown. Contractual labour is typically paid for a day of work or on the basis of production.