Reports indicate that Udaipur businesses are gradually easing into action. Manufacturing setups are nearing 40% production volumes and exports from the city are also nearing that number.
While there is some indication of things beginning to move in the manufacturing sector, the picture is still grey. On speaking to few stakeholders in the manufacturing sector in Udaipur, especially the mineral processing units and mineral mine owners, common industry wide issues are noticeable and are expected to keep the foot off the accelerator as far as return to normal is concerned. Pre-lockdown orders are on hold and new orders are just trickling in. Repeat orders seem like a distant dream. While the mineral industry is still seeing some movement, the stone industry is yet on below average capacity and orders - construction activities are on the hold and construction is the biggest buyer for stone.
Payment schedules and working capital management
The lockdown came during a very critical time for industry - March. This financial year ending cycle is filled with number crunching, recoveries and ramping up the payment cycle. Orders being effected on a 90 day credit cycle were due to payment fulfilment in the last week of March, but because of the country wide lockdown, most of the payments were put on hold. Another 3 months into the lockdown converted the 90 day overdue into a 180 overdue, which from working capital management point of view, has become a challenge for the manufacturing units in Udaipur. This will hold true for similar units across the nation.
Working capital issues of the previous two quarters has ballooned into cash flow constraints when it comes to ramping up production post the lockdown. Production capacity is barely reaching 40% and supply chain issues and subsequent payment schedules are keeping the businesses on tenterhooks. The ceramic industry raw material supplying units are operating at 50% capacity whereas their clients are operating at 35% capacity.
Previous and new orders need to be fulfilled by these units, who apart from working capital issues, are also faced with labour problems.
Labour has moved out due to migration. Those that have stayed back are assuming that the government asisstance will keep them going for some months, hence there is no willingness to look for work. These units are determined to keep their commitments to their customers and are working below capacity only due to cash crunch or labour issues. Financial assistance as promised by the government, is still in the pipeline and has not materialised.
Migrant workers who have returned to the city are not having matching skill sets, hence cannot be absorbed smoothly.
Supply to other cities
Mineral manufacturing and raw material providers in the the region are producing for supply to other cities in India as well as for export. While supply to certain areas has begun, the bigger cities have still not come out of lockdown to the extent that orders be placed. Supply to epicenters like Mumbai, Delhi, Hyderabad, Ahmedabad, etc is currently on hold. With transportation getting back on track, the new transportation rates are significantly higher, which is obvious as the operators have also reason to do so, as to maintain economies of scale. This rise in transportation costs along with rising price of fuel (petrol/diesel) has caused the total cost of ownership to rise. Material is becoming cosrtlier due to higher transportation costs.
Electronics and Electric products
Production capacity of electronic and electric product manufacturers is going up significantly. These products are assembled and sold locally. Import of raw material from China is continuing unabated, permitting these units to operate at optimal capacity. Valve, cutting machines, chemicals, marble, cloth for PPE bags, artificial quartz, etc are exported to countries like Oman, Spain, Nepal, Turkey and the Middle east. The Certificate of Origin is issued from Udaipur. Immediately post lockdown, 1-2 certificates were issued on a daily basis. In the next few days, 12-15 such certificates are being issues, indicating the growth in exports to these countries.
Source: information from media, UCCI, business owners in Udaipur