BHOPAL: FICCI’s latest quarterly survey on manufacturing paints a dismal status. The percentage of respondents reporting higher production in first quarter of 2020-21 has fallen significantly vis-à-vis the Q-4 of 2019-20.
The overall capacity utilisation in manufacturing declined to 61.5% in Q4 2019-20 as compared to 76% in Q3 of 2019-20. Future investment outlook looks subdued as only 22% respondents reported plans for capacity addition in the next six months as compared to 28% in previous quarter.
High raw material prices, high cost of finance, uncertainty of demand, shortage of skilled labour and working capital, high logistics cost, low domestic and global demand due to lockdown across all countries to contain spread of coronavirus, excess capacities due to high volume of cheap imports into India, lack of financial assistance, unstable market, high power tariff are some of the major constraints which are affecting expansion plans.
‘Prices of raw material depend on rates of dollars which is moving upwards thereby raising production costs,’ said Dinesh Patidar, chairman of MP chapter of FICCI. He said that the production is down by almost 50%. Export is yet to pick up, things might change after export is eased up.
Industry respondents have attributed the hike in production cost to high fixed costs, higher overhead costs for ensuring safety protocols, drastic reduction in volumes due to lockdown, lower capacity utilisation, high freight charges and other logistic costs, increased cost of raw materials, power cost and high interest rates.
In terms of back to business status, FICCI survey noted that on an average, firms are operating depending on the sectors between 28 to 63% of their capacities with workforce deployment ranging from 33 to 57%.
‘Though there isn’t much of labour problem in Madhya Pradesh but there are certain sectors where expert hands are required,’ said Amit Sogani, from Guna chamber of commerce. At present industries are working with less than 50% of the workforce, he added.
FICCI’s latest quarterly survey assessed the sentiments of manufacturers for Q-1 (April-June 2020-21) for twelve major sectors namely automotive, capital goods, cement and ceramics, chemicals, fertilizers and pharmaceuticals, electronics and electricals, leather and footwear, medical devices, metal and metal products, paper products, textiles, textile machinery, and miscellaneous.
Hiring outlook for the sector shows a bleak picture as 85% of the respondents mentioned that they are not likely to hire additional workforce in the next three months.
The primary reason for such depressed expectations seems to be the imposition of lockdown, restricted exports and other guidelines in place as a response towards COVID outbreak.