Karnataka SME industry: Strict lockdown, slump may dent Karnataka’s SMEs this year too – The Economic Times

Clipped from: https://economictimes.indiatimes.com/small-biz/sme-sector/strict-lockdown-slump-may-dent-karnatakas-smes-this-year-too/articleshow/82933539.cmsSynopsis

Karnataka is home to over 800,000 medium, small and micro enterprises and the sector provides the second largest employment after agriculture

BENGALURU: Medium, small scale and micro industries in Karnataka are battling one of their toughest challenges with last year’s lockdown coupled with subsequent downturn and again a lockdown now has led to many of them shuttering their operations.

Industry body KASSIA estimates that about 10-15% of them have closed down due to a variety of reasons including sharp drop in revenues, piling debt, non receipt of receivables, and lack of working capital. Sections of industrialists ET spoke to are concerned that a similar fate might befall the MSME sector.

Karnataka is home to over 800,000 medium, small and micro enterprises and the sector provides the second largest employment after agriculture. Thousands of industries that make CNC machines and power tools, electrical and electronic components, automobile parts, air control equipment and compressors, fabrication, machine tools, have major companies likeTata Steel, Bosch, JSW,HALas their clients.

Industrialists in the so-called non essential sectors say the burden of fixed costs such as repayment of loans, payment of fixed electricity charges, property tax and rent, wages to workers are adding to their distress as they have to honour these commitments even as their revenues have hit rock bottom.

The state government has banned all industrial units except those supplying essential components from functioning during the lockdown which has now been extended to June 7.

“At least 15% of small and medium industries permanently closed after the last year’s lockdown. Units that managed to survive the Covid first wave and began receiving fresh orders from December, are now staring at a huge crisis because of the lockdown,” Kassia president KB Arasappa told ET. The industry body predicts closure of another 30% units if the government does not offer timely support.

At Devasandra Industrial Estate in East Bengaluru, at least 12 units have shut shop. “The demand side too has collapsed. The second lockdown has particularly hurt conventional engineering units like manufacturers of auto components, component suppliers of commercial grade durables,” said NC Gopinath, secretary of the industrial estate.

Industries that are into metal cutting business are in a precarious position as their oxygen supply is stopped. Metal cutting industry is heavily dependent on oxygen as a combination of O2 and acetylene helps in melting the metal. But with the government prohibiting supply of oxygen to non-medical purposes due to surge in demand for medical oxygen, the metal cutting units have nearly stopped functioning since the third week of April.

“The OEMs are not getting parts for their operations which has reduced their outputs. Some MNC are diverting their orders to other countries. Since metal cutting is a capital intensive industry, industrialists are finding it hard to make loan repayments,” Swamy Magod, managing director at Magod Laser, said.

Closure of industrial units below 100 workers don’t come on the radar because they don’t need the government permission to close down, said SN Murthy, veteran labour law expert.

MSMEs are hoping the government will offer some relief package similar to last year. “We are asking both the Centre and the state to come to our aid. Extending the deadline for repaying bank loans, waiving fixed electricity charges and some such measures could help the industry to survive,” Arasappa said.

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