Bengaluru lockdown extension puts MSMEs in a pinch\, export orders at stake

Bengaluru lockdown extension puts MSMEs in a pinch, export orders at stake

Trade and industry associations stated that another lockdown in Bengaluru would destroy the morale of the managements and workers

Rukmini Rao | July 13, 2020 | Updated 23:06 IST

KEY HIGHLIGHTS

  • Karnataka has imposed a 7-day lockdown in Bengaluru rural, urban districts starting July 14
  • MSMEs say extension of lockdown will hurt the current business momentum
  • Export orders and Line of Credit at stake as lockdown continues
As Karnataka decided to shut Bengaluru urban and rural districts from July 14 till July 22 morning, owing to exponential increase in the number of COVID-19 cases, micro, small and medium enterprises (MSMEs) in the state fear that this extension could cause irreparable damage to the already fragile industries. As export-oriented industries have started getting orders, companies fear that extension would result in cancellation of orders and disrupt supply chain, which is crawling back to 20 per cent of revenues comparable to May-June period of last year.

Federation of Karnataka Chambers of Commerce and Industry (FKCCI), Karnataka Small Scale Industries Association, Peenya Industrial Association, and other trade and industry associations said that many industries in Bengaluru, especially in the manufacturing sector, have gradually started operating second shifts in the last few days to fulfil export orders. Another lockdown would destroy the morale of the managements and workers.

Babu, the proprietor of Sampath Engineering that has its export unit in Dobbaspet, supplies engineering goods to Bosch whose export orders are around 40 crores annually. "Production has picked up since last month and we are trying hard to fulfil the orders with 50 per cent capacity. If lockdown continues then again we will have to suffer due to machineries going idle," he said.

C R Janardhana, President of FKCCI, said, "The industrial sector contributes 26 per cent of the GSDP. Closure of industries at this stage will not only impact production and hit the jobs, but will also impact state GST collections". Of the existing industries in the state, companies that export to aerospace, pharmaceuticals, readymade garments, and electronic components have seen an uptick in fresh export orders with demand to replace Chinese substitutes getting stronger. Janardhana says industry is seeing a bulk of such export orders coming from European and African nations along with Singapore, Malaysia and the US.

The state government's latest order and guidelines for the week-long lockdown allows manufacturing and industrial establishments with access control in Special Economic Zones (SEZs) and export-oriented units that adhere to national directives for COVID-19 management. However, industries say that restriction on movement of people would invariably hurt in spite of exemption. With many workers staying outside of Bengaluru district, who travel to factories, will not be able to attend work, combined with the existing labour crunch, industry members are concerned that it would be difficult to run factories.

According to the FY19 annual report by the Ministry of Micro, Small & Medium Enterprises, Karnataka has nearly 38.34 lakh industries in the sector with nearly 38.25 lakh micro and 0.09 lakh small scale units.