June 13, 2024


Delighting finance buffs

Covid-19 fallout: Why freed up sectors are yet to reboot

EVEN as the country is eagerly waiting to see if the Union government will relax lockdown restrictions after May 3, the earlier measures to partially open up industries and businesses are proving to be quite a problem.

Supply chain disruptions, labour unavailability and myriad interpretations of Central directives by state administrations and local governing bodies are making smooth functioning impossible for manufacturing and services sectors alike. Add to that the unpredictability of the spread of Coronavirus – any relaxation given today can be withdrawn the moment a person in the locality tests positive. The plight of the private healthcare sector, which is on the forefront of the pandemic fight and is a service declared as ‘essential’ right from the beginning of the 41-day lockdown, is a glaring example.

The occupancy levels of the private hospitals have fallen from its pre-Covid level of 65-70 per cent to 40 per cent, a study carried out by FICCI in partnership with EY, reveals. The impact on diagnostic labs is even worse, with almost 80 per cent fall in patient visits and revenues. “The financial distress accentuated by Covid-19 lockdown has forced several standalone and small nursing homes in Tier II and III cities to down the shutters.

Many others are at high risk of closing down soon since their cash flows have dried up due to the steep decline in patient footfalls, and they are facing a liquidity crisis for even sustaining their staff salaries,” Alok Roy, Chair – FICCI Health Services Committee and Chairman, Medica Group of Hospitals, says. Special Economic Zones (SEZs), which account for almost a third of the country’s total exports, have also not taken off after the government allowed it to function with 50 per cent staff and sufficient social distancing safeguards, on April 21.

For instance, the Noida SEZ which houses 262 manufacturing units that together contributes Rs 9,000 worth of exports every year remains shut for over a month now due to lack of clearance from local authorities. The area comes under ‘containment zone’ as some people residing 1,500 metres away from the manufacturing zone have tested Corona-positive.

The pan-India truck movement, which is allowed to transport both essential and non-essential goods, has also failed to pick up despite several reminders from the Central Government to the states to facilitate it. “Movement of trucks is around five to 10 per cent only,” says Vineet Agarwal, managing director of Transport Corporation of India Ltd. What hinders truck movement is the availability of drivers. Increasing instances of harassment, accusations of being carriers of the virus and the need to get quarantined for 14 days post an inter-state trip are dissuading the drivers from taking up fresh assignments. The scarcity of trucks has resulted in 20-30 per cent increase in freight charges. “Earlier booking offices of transport firms used to consolidate 10 small offers and load the truck. Now their offices are closed,” Nipun Jain, a Delhibased pharmaceutical manufacturer, says.

Stating that cargo flights are charging three times more during the lockdown period, he wants to “wait for the freight rate to get normal.” The frequent changes in government directives are also nullifying the benefit of opening up. For instance, within a day of announcing that e-commerce companies can deliver any product, ‘essential’ and ‘non-essential’, the government clarified that it is open only for ‘essential’ goods sales. The biggest reason why the opening up has not worked so far is the lack of demand in the economy. “In a crisis, people would not spend money, they will preserve it,” an industry expert said. Representatives of Indian industry said that supply chain constraints will not go away until economy is opened up completely.

“A car is a sum total of thousands of parts and we have over 75 suppliers spread over the country. A significant number of them are in Pune and surrounding industrial areas, which, as you know, is a hotspot. Even if one part is not being supplied then it doesn’t matter if all the other factories operate – because the car cannot be made,” says Rajeev Chaba, president and managing director of MG Motor.

The Ministry of Home Affairs had to issue a clarification on April 23 to reiterate that its guidelines do not talk about penalising the company management if someone in the factory tests Covid-positive after resuming operations. “Social distancing is compulsory. Despite all our efforts, if more than five people decide to come close during lunch time at a factory that employs hundreds of people, will the management be responsible?” Mahesh Keyal, a Kolkata-based manufacturer asks. Whatever relaxations the government might announce post May 3, its real success will depend on the extent normal operations can happen.

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