With auto companies slashing production due to slowing demand for vehicles, there has been a cascading effect on ancillaries in Punjab, which are now hit by a lower volume of sales of their products.
Some 2,000 units engaged in manufacturing of vehicle fasteners in Ludhiana — the Manchester of India — who were together producing 4 crore metric ton of fasteners per month, have been forced to cut production and work shifts by half.
Entrepreneurs said, the mean production drop is about 50 per cent with units reporting between 60- 70 per cent cut in production personnel and layoffs.
Production has fallen to below two crore metric tons a month. The situation is such that some owners of such facilities say the personnel they engaged have been told to go on Rs compulsory leave’ without pay.
Others have cut working hours from the normal 12 to 16 hours to just eight hours and are giving two compulsory offs to staff as they themselves struggle with falling profit margins and salary heads to keep their heads above water.
Fasteners Manufacturers Association which has 450 primary members and 1,200 associate members, informed that 2,000 units in Ludhiana are engaged in manufacturing fasteners like nuts, bolts, screws, studs, washers, rivets, hand tools used in auto and infrastructure sector, PSUs, hardware and cycle industry. They employ over 50,000 people directly while creating indirect jobs for over one lakh people.
Narinder Bhamra, President of Fastener Manufacturers Association of India (FMAI) said, “Our production has been cut by 50 per cent from four crore metric ton per month to under two crore ton due to the economic slowdown.”
“Units which were supplying to auto sector have seen sales fall by some 80 per cent to 90 per cent. This has virtually sounded the death knell for us,” he said.
Entrepreneurs also said, “many units which supplied to leading brands in auto industry like Maruti, Tata Motors, Ashok Leyland, are now on the verge of shutdown. “With the auto sector itself restricting production and next to no demand in the last three months for our products, factories dependant on them for supplies are folding up. Most are unable to meet even the basic expenses such as salary and electricity bills,” said one of the people.
Others said the impact is more since PSU’s like BHEL and Railways have also delayed payments. “Earlier, we used to get paid for supplies within 45 days in line with the MSMED Act 2006. But for last one year, our payments have been delayed by more than six months,” said Bhamra.
Industrialists said the reduction of GST to 18 per cent may spark some demand for new commercial and passenger vehicles. The scrapping of 15-year old vehicles would also boost demand. GST refunds, which are on hold, should also be released immediately too, they suggested.
“My turnover, which was Rs 3 crore per month has dwindled to just Rs 31 lakh. How can I run the business without meeting salary and other basic costs,” rued Vikramjit, an entrepreneur. “Auto manufacturers have told us to reduce cost of our products since they have cut prices but are still loaded with inventories that don’t sell.... Their quality control teams are now trying to pick faults in our material supplied earlier in a bid to delay payments or return them.”
Raj Kumar Singla, President Fasteners Supplies Association said, “As there is hardly any production, most units have slashed working hours drastically, which has meant forced layoffs.”
A government official asked about the non-payments for supplies to PSUs said, “Under the delayed payment act facilitation system, councils have been formed to address such grievances.” Besides, there is the Samadhan portal on which industrialists can lodge a complaint. “The Director (Industries), Punjab has empowered Deputy Commissioners of seven districts — Ludhiana, Jalandhar, Amritsar, Patiala, Mohali, Bathinda and Sangrur— to address the matter,” the official added.