COIMBATORE/CHENNAI: Hit by COVID last year, many industries across the State are looking forward to a more fruitful 2022, despite the Omicron threat. With higher raw material cost impacting balance sheets significantly, cost cutting and ingenuity are the mantras now.
Having weathered lockdowns and a tragic migrant crisis not long ago, entrepreneurs have become more resilient. At Tiruppur, the textile hub of India, things are finally starting to look up as garment makers look to make up for lost time.
"Garment industry suffered very badly during the lockdown. The months of April, May and June were very harsh for us. Even though there was revival later on, the happiness was short-lived. There was severe shortage of containers throughout the world and exporters were greatly affected"said Tiruppur Exporters Association (TEA) Treasurer P Mohan.
"This continued for the next six months and many garment exporters and importers were forced to book flights to transport their goods. So, profit margins were greatly reduced. Later, yarn prices became an issue and thankfully, the GST hike will be rolled back. Despite these setbacks, the industry bounced back and businesses were revived," added Mohan.
A garment exporter said, "I suffered the worst in the first COVID-19 wave in 2020. I got an order from Belgium worth several crores, but was forced to close my facility for more than three months. But thankfully, the buyers postponed the order and I was able ship it before it was too late. Currently, I have many orders from England and Belgium. Though Omicron is a serious issue in England, my buyers aren’t greatly worried in the present scenario."
The textile mills too foresee a brighter 2022. "The production levels of spinning mills are at an all-time high. But there are challenges, such as rising transportation cost and labour charges. Furthermore, deficit power is also hurting yarn mills and many facilities are running in diesel. However, due to higher prices of yarn, all mills are in a better place in terms of financial status," said Dr Venkatachalam, Special Adviser, Tamil Nadu Spinning Mills Association (TNSMA).
However, the MSME sector presents a picture in contrast. The mood is pessimistic and many are worried about the future. Thanks to uncertainty caused by COVID and increase in raw material prices, many units have cut production to cope with the loss. Workforce reduction is widespread too.
"We are facing severe difficulty due to the continuous rise in raw material cost since the beginning of COVID-19 pandemic in 2020. We still run the units but with minimal workforce," explained MV Ramesh Babu, Coimbatore District Small Industries Association (CODISSIA) president, who says industrial units have lowered production by up to 40 per cent.
Ramesh said some units have declared holidays on weekends and some are operating a single shift per day in place of three. The CODISSIA president further said the units have several commitments like showing turnover to the banks and settling rent and electricity bills. Many units have cut the overtime (OT) option for their workers, he added.
Seconding Ramesh, S Surulivel, Railway Suppliers Association (RASA) president, said: "We have slowed down production to manage the loss due to rise in raw material cost by 40 per cent." Tamil Nadu Association of Cottage and Micro Enterprises president J James said that nearly 90 per cent of the micro-units in Coimbatore are idle without orders.
The impact of rising raw material cost is being felt elsewhere too. V Nityanantham, who used to take orders from IIT-Madras, says this year, the turnover is not even Rs 75,000. Usually reliant on small orders, many Tier-III entrepreneurs are now downing shutters in Chennai.
COVID-19 may have hit the sector hard but rise in raw material cost and banks' refusal to provide them with credit are the factors threatening them the most. The only silver lining is that exports have picked up for some MSMEs in the Ambattur Industrial Estate in Chennai.