Ferrying essentials may be hit as drivers head for hometowns; fresh orders on hold
As COVID-19 cases continue to spike in several parts of the country, fears of a fresh nationwide lockdown have caused panic among transporters and MSMEs.
Following protests by traders, restaurant owners and their employees in Maharashtra, which is under a mini-lockdown and night curfew, transporters warned that supplies of essential items and medicines may be impacted as drivers were heading to their hometowns in large numbers.
“We understand that the lockdown measures in several States are slowly leading to concern among the drivers,” said Abhishek Gupta, joint secretary, All India Transporters Welfare Association.“Over the last few days numbers of drivers going to village is increasing. They fear that if trains are stopped they may be stranded again,” Mr. Gupta said. “The Central government must take necessary steps to inform that transport will not be affected, else we will have a similar situation as seen in first few weeks of March 2020,” he added.
“We anticipate that if the availability of vehicles reduces, supply of medicines, essentials and raw materials would be affected. Freight rates could firm up and this would lead to increase in prices,” he said. According to him, small transporters who deal with traders and shops have started feeling the heat as the premises of their consignees are closed, leading to materials getting held up and their business volumes dipping drastically.
Trade associations of micro, small and medium enterprises (MSMEs) said that though strict restrictions were yet to be implemented, the COVID fear had already started taking a toll on firms.
“A totally unpredictable situation and insecurity has already set in the minds of employers, employees and customers,” said K.E. Raghunathan, convenor of Consortium of Indian Associations. “All payables to the government must be extended by six months,” he added.
“Now, the traders and MSMEs want the government to act faster to save us from a severe blow. We cannot afford sudden lockdowns again. Though a full lockdown is inevitable, it has to be stimulus first and [impose] lockdown next,” he said.
“Lack of seriousness from the public and administrators will ultimately kill entrepreneurs,” Mr. Raghunathan warned.
He said since new restrictions had been put in place, fresh order bookings had been put on hold. This would hit the sector hard because companies generally finalise annual rate contracts in the first quarter. “Advances against orders have stopped because firms are unable to give delivery commitments and there is uncertainty whether migrant labourers would continue to work,” he said.
He said all B2C, B2B contracts of annual maintenance contract (AMC) renewals had been put on hold. In States where Assembly elections are on, B2G contracts are waiting for the new government.
“Despatches and installation plans are on hold, blocking investment and cash flow plans. All tourism and travel related activities are stopped for the second consecutive year. Campus and fresher recruitments are on hold and temporary employees are being asked to go due to unpredictable future,” he said.
Stating that SMEs were finding it difficult to bear the COVID-19 related additional cost, he said banks had started pressuring for regularisation of accounts.
MFI collections
Mini lockdowns imposed by States could impact the collections of micro-finance institutions (MFIs), rating agency Crisil said in a report. “Maharashtra is also among the top five States in terms of microfinance loans, with assets under management (MFI AUM) of ₹16,700 crore as on December 2020, tantamount to 7% of all micro-finance loans. Non-banking finance company microfinanciers (NBFC-MFIs) account for 40%, or ₹6,700 crore, of this pie,” Crisil said.
The collection efficiency in Maharashtra had been relatively lower at 85-90% even before the latest curbs, because of previous extended lockdowns, Crisil added hinting at further reduction in collections. The all-India average collection efficiency was 90-94% in December 2020.
“The sector’s collection efficiency has stalled at 90-94% in the past few months compared with the pre-pandemic level of 98-99%,” said Krishnan Sitaraman, senior director and deputy chief ratings officer, CRISIL Ratings. “These mini-lockdowns can restrict improvement in the coming months,” he added.