With a substantial number of manufacturing units located in red and orange zones, India Inc expects that the central government will relax the rules in such zones and help them restart production.
Red zones are districts where many Covid-19 cases have been detected — some of them have been declared hotspots — and no activity might be permitted there. Orange zones are those where there are fewer cases, but can be some activity. The central government is coming up with detail guidelines for opening up of manufacturing units.
Corporate houses want the governments to divide districts into smaller zones to identify low-risk areas where factories can start work, peg production capacity to the risk of Covid-19 in a zone, allow factories that do not come under the Essential Services Maintenance Act (ESMA) to operate in the orange zone, and broaden the definition of essential services.
A top executive of the Society of Indian Automobile Manufacturers (SIAM) said not a single unit was located in the green zone (where there are no Covid-19 cases) according to estimates. He said the situation would be similar for the component industry too. So, if these zones are kept under a tight leash with limited or no economic activity, they won’t be able to open units.
Said R C Bhargava, chairman of Maruti Suzuki: “I expect that the government will divide the affected districts into smaller sub-zones and permit industry in those smaller divisions, where there is little risk. A district is a very big zone. The process has to be in stages.”
Automakers said the government needs to open up some key industries like auto, textiles and electronics and their vendors in the initital phase of opening up and then add in more sectors. The SIAM executive said: “It’s not only the OEM (original equipment manufacturer) whose factory has to be opened in the zone, even component suppliers have to start production and some dealers have to open their shutters as we have to also sell our product. So it is a complex process.”
So far, around 48 per cent of 727 districts in the country have reported Covid-19 cases.
CEOs say various models have been looked at during interactions with the government. Says a CEO of a well-known tyre company: “One of the things that is being looked at is whether the capacity permitted at a factory should be pegged to which zone it is located in. For instance, it could be 50 per cent capacity in the green zone and 25 per cent in orange zone but nothing for the red zone to begin with.”
Tyre companies are hoping that the manufacture of tyres for tractors is included under the ESMA and that as they have continuous processing plants they should be treated on a par with sectors like steel and refineries.
In Tamil Nadu, for instance, 17 of the 34 zones are classified as red. These include Chennai and Coimbatore (engineering hub), Tiruppur (knitwear hub), Erode (textile), and Tiruchirappalli (engineering) amongst others.
The auto hubs of Sriperumbudur and Oragadam that house the big firms like Hyundai, Nissan, Renault, Ford, Royal Enfield and Yamaha are located in Kanchipuram district, which is an orange zone. A top official in the state government said they would decide on how to kick-start production activity in these zones after the central government comes out with its guidelines, expected to be released on Wednesday.
Tiruppur textile manufacturers, despite being in the red zone have been pushing the government to open up factories at limited capacity. That is because they have to make samples for clients in the UK, the US and Europe in the coming weeks.
Raja N Shanmugam, president of Tiruppur Exporters Association, when asked how they could open an industry hub in the red zone said: “If they don’t reopen we will all die. Government is well aware of the seriousness of the issue.”
There are, of course, others like JSW that despite being under ESMA have virtually suspended production because of logistical challenges and lack of demand. However, they want to get going now, and the company is slowly mobilising around 7,500-8,000 third-party contract workers for its plant in Dolvi in Raigad district of Maharashtra.
Arrangements are being made for them to stay in tents put up on the factory premises. It has also applied to the state government to provide bus service for those employees who might have to commute.