Economic slowdown hits factories hard in Coimbatore

A Unnikrishnan, 51, used to make Rs 25,000 a month till about five months ago when he ran a lathe workshop that embellished spare parts for hollow block machines. This was his take home, even after paying salaries for two people who worked for him.

Today, he is very unhappy. He closed down his workshop, sold machinery to clear off mounting debt and works as a casual labourer earning Rs 500 a day -- he doesn’t get to work every day with the economic slowdown affecting every industry -- at a lathe workshop in Coimbatore.

R Sivakumar, 45, is sitting idle at home since September last year. An automobile spare parts manufacturer, who once employed four people, he had downed his workshop’s shutters five months ago due to a heavy slump in demand and has been unable to resume production.

The situation that Unnikrishnan and Sivakumar find themselves surmise the crisis that the Micro and Cottage industries in Coimbatore. The micro, small and medium Industries (MSMEs) aren’t doing any better – most companies have scaled-down operations, implementing non-working days and even laying off a few employees unable to bear losses due to drop in demand across sectors.

“Demand is down by at least 30%. The slowdown has really affected industries across the board. It is not just small units that have faced the wrath but the large ones too. Most companies have announced non-working days and reduced their production capacity in the past six months,” a top industrialist told DH on condition of anonymity.

Coimbatore, home to industries that manufacture automobile and textile spare parts, wet grinders, pump sets and parts for hollow block machines, speaks in one voice about how the slowdown has pushed them down, just when the industries were showing signs of recovery from the crisis perpetuated by demonetisation and botched GST implementation.

They say that a liquidity crunch has become a major problem with banks refusing to grant new loans or restructure existing ones.

Coimbatore-Tirupur district Micro and Cottage Entrepreneur Association (COTMA) president, C Sivakumar contends that several job work units that survived the twin blow of demonetisation and GST were forced to down their shutters in the past few months, thanks to the economic slowdown.

“Most manufacturing units have surplus stock. They don’t give any fresh orders to job work units who depend on big companies for their living. Also, many of the job work units face the problem of liquidity crunch as banks don’t come forward to help them reschedule their loans. Instead of living in losses, many owners have shut their units,” Sivakumar told DH.

GST hits small units

The job units largely comprise of five to ten people who work in the confines of their residence or small workshops have been suffering ever since the introduction of GST in 2017 as they were brought under tax ambit for the first time. Though they were taxed at 18% in the beginning, it was brought down to 12% but the units say they don’t do any value addition and hence they should be exempted from paying tax.

Though Unnikrishnan is happy that he cleared off his debt, he is unable to make ends meet with the meagre amount that he earns as a daily labourer. “I don’t get the job regularly. I consider myself lucky if I get to work four days a week and that gets me hardly Rs 2,000. How will I run my family?” he asks.

Sivakumar adds, “I have been in the field for 12 years and could feel the pinch after the introduction of GST. I was recovering from the losses when the slowdown hit me so hard that I can’t get up again. Machinery valued Rs 20 lakh is still lying in my workshop and no one will buy it unless I repay the loans availed from the bank.”

A B Balan hasn’t closed down his unit, that basically processes raw materials or intermediate goods to consumable products. However, he has had a rollercoaster ride since 2017. “There was a time when I had showed a turnover of Rs 1.5 lakh a month. Today, I can’t have a turnover of about Rs 20,000 to Rs 30,000. GST is like a slow poison that has killed this job work unit,” he said.

The water pump industry also faces troubled times since the demand has almost halved in the past year, leading to many units scaling down their operations and some closing down temporarily.

“Even the agriculture and realty sectors are down and hence the demand for pump sets has come down drastically. Even during the peak season, we have been able to sell only 10,000 units as against 30,000 units normally,”

Kovai Power Driven Pumps and Spares Manufacturers Association (KOPMA) President K Maniraj said.

While acknowledging the problems faced by MSMEs and micro industries, R Ramamurthy, President of the influential Coimbatore District Small Industries Association (CODISSIA), exhorted financial institutions to help the MSMEs in tiding over the current crisis by infusing funds in their hands.

“We appreciate the government for its thrust on MSMEs in the budget. But the banks are still reluctant to give loans to small and medium enterprises which have been hit by the slowdown. There should be standing instructions to banks to help the sector tide over the crisis,” Ramamurthy added.