The impact of Covid-19 on the auto component industry has led to a production loss of ₹1,000-1,200 crore per day. Retrenchment in the industry, especially of contract workers, seems likely if the lockdown continues after the stipulated date.

With a three-week lockdown announced by the government, production has come to a standstill in the automotive industry across the country, the Automotive Component Manufacturers Association (ACMA) said on Friday.

Auto component manufacturers are facing severe hardship on the cash flow front which, if not immediately addressed, will lead to insolvency of several companies, especially those in Tier-2 and Tier-3 cities, it said.

Litmus test

“We will take out at least as an advisory and most companies will do as much as possible, but if I don’t have any cash to pay, I can’t do it (pay the workers). But, as long as there is cash flow management will be extremely critical,” Deepak Jain, President, ACMA, told BusinessLine .

He said ACMA will intervene as much as possible to ensure that there is immediate release of certain cash flow from the government as well as the customers because if the workers’ payment cycle gets impacted then they are also burdened.

He said the salaries of the workers, including the contractual workers, will be given out on March 31, much earlier than usual date of seventh of every month.

“It’s a trickle-down effect. However, as of now, most of the original equipment manufacturers (OEMs) have been forthcoming and we have also appealed to them to pay on time, which they have done so far,” he said.

Jain, however, also added that the situation is changing everyday and the next two-three weeks will be the ‘litmus test’. There is no clarity on how the market will pan out in the ensuing months, thus further eroding the industry’s confidence.

Mulling making face masks, sanitisers

Meanwhile, ACMA has created a task force that is evaluating the possibility of manufacture of face masks and hand-sanitisers by its members.

Several of the component companies have shown keen interest to manufacture these items.

Specifically, for ventilators, members are evaluating the option to import them through their CSR funds. The industry also seeks guidance from government on the standards for such equipment and the quantity needed, Jain said.

“We have requested the government to help us with immediate relaxation of borrowing norms and statutory payments, extension of moratorium on payment of principal and interest of loans for a year, among others. We are also seeking support of SIAM and the OEMs to ensure minimal disruption of the supply chain,” he added.

ACMA has requested the government for support for working capital — relaxation of borrowing norms and statutory payments; norms for NPA recognition to be eased by extending moratorium on payment of principal and interest by at least one year; relaxation in fixed electricity charge; and relaxation in levy demurrage charges for at least seven days for import cargo clearance.