Chennai floods: MSME sector fears loss of customers, business if recovery is delayed

Small scale industries hit by the floods earlier this month face long-term business losses as customers look to alternative sources for components.

Over 20,000 micro, small scale and medium enterprises were damaged in the heavy rains and the ensuing floods in Chennai and neighbouring districts earlier this month. The livelihood of more than two lakh workers in these units is also at stake.

While the Centre and State governments, and financial institutions have committed to support rehabilitation of affected units, MSME representatives say funds have to be disbursed fast. If delayed, the units may lose customers and business.

The MSME units make up the lower rungs of a supply chain with large industries such as automobile companies, power plant builders and engineering industries at the top. These large players cannot afford to wait for component supply.

They will naturally look for alternative sources, including imports. New suppliers will expect long-term agreements before they step in. This will mean the MSME sector in Tamil Nadu will be displaced, says VS Narasimhan, Director, Micro Pixel, a small scale unit in the Guindy industrial estate.

He points to a dozen CNC machines at his factory that were until last month making a key component for a car part. But the entire factory, along with 2,000 other units in the area, was flooded earlier this month. The precision equipment have been stripped down for servicing.

“We have managed to get two machines to work and there are 17 more to be repaired. I do not know when that will happen?” he says.

The equipment suppliers themselves are overwhelmed with demand from thousands of such flood-hit industrial units.

Shanmugha Velayudham, a small scale entrepreneur, who supplies power plant parts, says the components he supplies cost a few lakh rupees. But his customer cannot put a ₹100 crore power project on hold.

Narasimhan says entrepreneurs are yet to see any of the promised support. Most banks are waiting for word from their headquarters in the North, he says.

Velayudham said the floods have been officially recognised as a ‘calamity of severe nature’. The Centre can support with excise duty concessions to give the MSME sector in affected areas a small edge for a specific period. Large industries that buy components from units in affected areas can be given notional credit benefit — they pay a lower rate of duty but take credit for the normal duty. The State government too can step in with concessions on local levies, he said.

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