BENGALURU: The small world of the SME sector lives hand to mouth at the best of times, be you the employer or the employed. Most of the workers are paid daily or weekly and the owners get by with some tight management of inventory and cash flow. Demonetisation has tipped the balance of the sweatshops in Peenya and Chamarajpet in Bengaluru.
If you got through November by dipping into all the goodwill you had in your karma account, December threatens to put you into overdraft territory.
Mary Nirmala spent the last three weeks of November begging for loans from friends, neighbours, relatives, colleagues, anyone who might have a hundred or two. The mother of three and employee of an agarbatti factory in Chamarajpet in Bengaluru is broke and December’s pay day has not come yet. But December’s bills have.
She is the only breadwinner of her family, her husband being too ill to work. “Even today, before I came to work, I borrowed `200 from a neighbour,” she told Express, her face betraying anxiety about negotiating December and then paying back her loans when demonetisation’s demons will presumably go back to where they came from.
Over the past four weeks, hundreds of SME daily-wagers like her have stood in queues at banks several times a day only to be told there was no cash when they finally make it to the counter. At the end of it, they return empty-handed, having lost their daily wage at the factory too.
When Express visited several SMEs in Peenya and Chamarajpet, the situation everywhere was the same. Labour-intensive and consumer-oriented sectors like garment and agarbatti factories were the worst hit as their business has dulled down following the demonetisation move.
Sakamma, a garment worker in Peenya, said the prospects for December look bleak, be it the school fees for children or rent for her house. “We requested the landlord to exempt us from rent this month and we have taken time from schools too.
However, next month we will have to pay double the amount,” she said.
Owners in a tough spot
It’s small consolation to workers that the Seths are struggling too, scurrying around to raise cash to keep operations going.
The Labour Department has sent circulars to industries directing them to pay salaries only through the bank. But transition is not easy in the SME sector.
Creating a bank account takes at least a fortnight and workers have to be paid weekly, explained B R Srinath of Raj Fragrances in Chamarajpet.
“The week after demonetisation, I pulled out money from my savings account to pay my employees. This month we have to see how to arrange the money. All employees cannot go and stand in the queue the whole day to open an account,” he added.
And then there are the unforeseen problems. While some of the workers do have bank accounts, each has one in a different bank, said Suresh B R, owner of SSR Garments located in Peenya Stage II.
“Garment making is a labour-intensive industry. A factory may employ more than 100 employees. We have to draw `12-14 lakh in cash just to pay wages. The weekly withdrawal limit of `50,000 does not even come close to what we need,” he said.
Demonetisation has come at a particularly bad time for the garmet factories in Peenya and Chamarajpet, November to January being the lean period in the business. Now, cash-starved, business has grown dull and orders have fled. “We used to get around 30,000 orders per month. Now we are down to 10,000,” said Suresh of SSR Garments.
While welcoming demonetization, Karnataka Smallscale Industries Association president A Padmanabha said the implementation has caused considerable damage. “By their very nature, SMEs heavily depend on cash to pay wages and buy raw material,” he said.