After nearly a month of the lockdown, India Inc will take its first tentative steps towards resumption of production on Monday. This comes even as supply chain constraints and labour shortage remains. Some sectors and firms are taking the lead though, while others are choosing to be cautious, owing to challenges ranging from nervous truckers, growing containment zones and demand that remains patchy.
Predictably, fast-moving consumer goods (FMCG) and agri-input companies are ramping up capacity as they prepare to meet demand in rural areas after it opens up on Monday, following relaxations by the Ministry of Home Affairs.
Engineering firms such as Thermax will resume production using limited workforce at two plants, while conglomerates such as the Aditya Birla Group, including flagship Grasim, will also commence production using standard operating procedures, in line with hygiene and social distancing norms. Cement companies will make dispatches only to consumers.
Nippon Paint, said President Sharad Malhotra, is working on putting up workers at a dormitory within its plant and Toyota Kirloskar Motor has drawn up a detailed blue-print on how it proposes to start production under the new social distancing rules covering factory premises, retail outlets, pantry, staff quarters, sales office, and transportation of workers.
“We have identified specialised agencies who will sanitize the factory. We are also ensuring that in case of two shifts, there is no overlap between the two. Self-declaration by workers while entering the plant will also be done,” said Malhotra.
M S Unnikrishnan, managing director and chief executive officer, Thermax, said work at two plants in Maharashtra would begin with 25 per cent capacity for the next few weeks using the stock available at site.
Dilip Gaur, managing director, Grasim, said the firm had enough stock available and getting workers into plants was not a challenge since most factories and residential townships were located close to each other. “We have plans in place to run the factories with flexible teams in keeping with social distancing norms. Standard operating procedures include strict gate controls to ensure safety of personnel,” he said.
But there are others who are choosing to stagger production. Companies such as Mahindra & Mahindra and Tata Motors as well as most textile majors, fertiliser companies and ceramic tile makers are in no hurry to resume production and are likely to decide on opening up after May 3, when the lockdown is expected to be lifted.
Electronics majors LG, Oppo, and Vivo have failed to secure nod from the Noida district magistrate to resume production on Monday, and Honda is not commencing production in Manesar, too, checks with the respective companies have revealed.
Sources say the incentive for electronic majors to open plants on Monday does not exist, since the online channels will not be available for sale. On Sunday, the government withdrew the relaxation provided to e-tailers last week to sell non-essential goods, implying they will continue to sell only essential goods like offline retailers.
Balfour Manuel, managing director, Blue Dart Express, said his company would continue to deliver essential shipments at various cities, including medical equipment, and ventilators.
Steel firms, too, have no plans to increase production yet, though firms such as Jindal Steel & Power expect a demand boost once the lockdown is lifted and JSW Steel is evaluating restarting production in phases.
T V Narendran, chief executive and managing director, Tata Steel, said: “We will service requirements from the inventory we have and current level of production, and will take a call to ramp up further based on offtake and inventory reduction.”
Public sector steel major Rashtriya Ispat Nigam said it was waiting for the market to resume operations. “Once core sectors like manufacturing, auto, forging, construction, and real estate, which are the prime users of steel, start functioning, there will be a surge in demand,” the company said.
Krishan Sachdev, managing director, Carrier Midea India, said unless large-format retail stores were allowed to open, increasing capacity made no sense. “We plan to begin plant activities with 100-150 people on Monday and will start with only one assembly line,” he said.
This point is reiterated by officials in the auto sector who say that for production to resume, it is critical to have a bird’s eye-view of the entire ecosystem — starting from functioning of supply chain to retailing of models and seeing whether demand will be there at all.
Consumer sentiment has tanked and buying a new car will be the least of the priorities amid poor economic conditions and a prolonged lockdown that has stoked fears of job loss, analysts say. The focus remains on essential items including food and hygiene products, implying FMCG and agri-input majors have much work ahead.
Agri major UPL, for instance, has been running operations through the lockdown and will continue to ensure reliable supply, Jai Shroff, global chief executive, said.
Firms such as Hindustan Unilever, ITC, Nestle, Dabur, and Parle Products have all submitted concrete plans on new standard operating procedures that involve maintaining safe distance at factories, mandatory use of gloves and face masks, regular health check-ups with resident doctors, and disinfection tunnels at entry and exit points.
Capacity utilisation, which stood at 20-40 per cent for most FMCG companies, is expected to improve to 50-60 per cent in the coming days. “We are getting more passes for our workforce at factories and distribution centres,” said Mohit Malhotra, chief executive officer, Dabur India. “This will allow us to improve last-mile distribution. And, help us increase production.”
Viveat Susan Pinto, Dev Chatterjee, Surajeet Dasgupta, Arnab Dutta, Shally Seth Mohile, Amritha Pillay, Aditi Divekar, Dilip Kumar Jha, Ishita Ayan Dutt, Avishek Rakshit and Vinay Umarji contributed to the story