Tamil Nadu Spinning Mills Association (TASMA) recently conducted a survey among its member mills about the impact of the lockdown on mills, in the wake of COVID-19.
The mills are united in their claim that a lockdown is important in the fight against Covid-19, and they have a social responsibility to protect lives. Stopping production is a better option in the current market situation
As many as 81% of the 179 respondents said that they would be ready to shut down their mills during the lockdown, as per government directives.
Mills feel it is better to stop production as anyway many orders are cancelled, and production should match demand. Existing production with no demand will only lead to a crash in prices. Mills will resort to distress sales as soon as markets open.
Citing the example of the cotton yarn export ban in 2010, one millowner said that mills had continued to run their mills, leading to oversupply and capital erosion. So it would be wiser to stop production anyway in this situation.
However, some mills have to complete orders in hand by March 30, and were not able to shut down immediately. Some millowners believe that in the current situation of almost zero demand, mills at some point would have to halt production, and not just due to government directive.
Mills will face cash flow issues, non-availability of raw materials as state borders are sealed, there are no buyers in the market, and above all, it becomes imperative to take care of the lives of workers and employees. Some millowners argued that mills know the capital employed and the return on it, and if a mill is working to maximise returns it is only logical to stop production in these market conditions.
Some are confident that once markets return to normal, mills will be able to make good their losses of the lockdown period.
It also gives spinners a chance to analyse the market, and to put in place strategies that will help tide over the economic slowdown that we are staring at.
Wages is a difficult issue
A large number of workers in the mills are migrant labour – from other parts of Tamil Nadu and even from North India. A large number of mills -77% – were agreeable to providing food to the workers and letting them stay in the hostels or dormitories, even without work.
It is necessary to protect their teams, they felt. However 23% of the mills said that the workers would need to be sent back to their homes. However, others felt that they would be in an impasse as leaving labour idle could lead to problems, many would go back to their native lands, and getting them back could take at least two months, during which factory operations would suffer.
Payment of wages is an important aspect of the lockdown, with the central and state governments appealing to private companies to pay full wages to their workers. However, in the survey, 61% of the mills believed in no work no wages. While 39% of the mills said that they could pay 50% of normal wages as layoff wages.
Some mills said workers too suffer during such lockdowns. However, many mills said that it would get difficult to bear all the costs during a lockdown. According to one mill, a solution could be to pay wages according to the attendance history of the worker. Others believe that there should be a 50% reduction in all costs for a mill, for a period of 2-3 months. Almost all mills wanted a three-month moratorium on loans, which the government has granted.