THE ROADBLOCKS AND POSSIBLE SOLUTIONS
PROBLEM 1: Factories are shut. When they reopen, they should be able to ensure safety of lakhs of workers. They will not be able to operate at full capacity due to restrictions on number of workers inside factories
SOLUTION:
Factories and industrial complexes need to be quarantined for the time being and food and medicines supplied to workers. Production can start with staggered shifts and remote employees
PROBLEM 2:
Most infrastructure and manufacturing companies such as Tata Steel, Reliance Industries, JSW Steel, Vodafone Idea and Tata Motors have huge debts. Since cash flow has fallen, it will be tough for them to service their loans
SOLUTION:
They will have to cut costs — raw material, employee and fuel — drastically to maintain cash flows. Suspend expansions, acquisitions and diversifications. Conserve cash on books. The RBI should allow banks to restructure loans based on sector.
PROBLEM 3:
Lack of demand. No buyers for houses, cars and other non-essential items. This is affecting manufacturing and commodity companies
SOLUTION:
The government will have to provide liquidity to consumers in the form of tax waivers, subsidies and rural development and job guarantee schemes. The companies should come up with low-cost products that can sell even in poor demand conditions
PROBLEM 4: Movement of finished products from factories, especially between states, has become difficult. Dealer and subdealer networks have been broken down in many cases because of shortage of labourers
SOLUTION: Companies can bring back some dealers as well as labourers by offering medical insurance and safety gears. Coordinate with government agencies for smooth transport of goods. Local governments should provide support to operation of plants and logistics.
PROBLEM 5:
No new orders at engineering and construction companies. Until January, at least 60 per cent orders of infrastructure companies were coming from the government. The medical emergency is expected to empty government coffers in the short to medium term. The companies are unlikely to get pending payments for work done.
SOLUTION:
Retain the workforce with minimum costs. Conserve cash. Shift focus from present cash flow to future cash flow. Look at smaller projects. Use the spare time for innovation