The lockdown induced by the second wave of the novel coronavirus has come as Pune’s small and medium scale enterprises (SMEs) battle towards scarcity of working capital as money flows have dried up.
Even because the work-flow is slowly returning to normalcy, the requirement of working capital and rising credit score might end in about 35 per cent of the items in Pimpri, Chinchwad and Chakan areas turning into sick items and compelled to shut down.
Abhay Bhor, President, Forum for Small Scale Industries Association, defined how the sector is dealing with scarcity of manpower and uncooked materials within the final three months. Unlike the lockdown final yr, the sector didn’t see a large-scale exodus of employees, however about 20-25 per cent of the 4-5 lakh employees moved out of Maharashtra at first of the lockdown.
The availability of uncooked supplies and lack of labor after April had seen SMEs taking a pinch for money circulation. The value of metal had doubled and as soon as the Covid-19 instances began rising, the bizarre enhance in demand for oxygen additional hit the business. In April, the state authorities banned the economic use of oxygen and shipped it to hospitals.
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The gasoline is used for welding and can also be essential for automotive SMEs, whose hub is Pune. As such, many of those items needed to stay closed as a consequence of lack of oxygen provide.
After May, because of the fall in oxygen demand, the state authorities allowed diversion of 20 per cent of the gasoline for industrial functions. Also, rest in working hours and store timings has come as a reduction to many.
But Bhor stated the issues within the sector weren’t over but. “The biggest concern for us now is the difficulty in raising working capital,” he stated. The money circulation has utterly dried up within the final three months as a consequence of declining vehicle gross sales. Due to scarcity of uncooked materials and workforce, orders within the pipeline additionally did not ship. The minimal working capital required to run any unit is round Rs 15 lakh which isn’t able to extend.
“Dead investments include government dues, salaries and servicing of existing loans. For small units, these work out to around Rs 2-3 lakh, and without any income, they are left to fend for themselves,” he stated.
Bhor stated about 35 per cent of the 11,000-15,000 items within the sector are prone to being declared defaulters by banks, which can freeze all sources of institutional finance for them.
Bhor stated the SMEs have requested the state authorities for a brief interval of depart from paying authorities dues equivalent to electrical energy prices and company tax. “What is essential for this sector to survive is access to finance. At present, most of the banks are refusing to lend to this sector. The government should intervene at this time,” he stated.
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With inputs from TheIndianEXPRESS
