Bengaluru: In his mammoth shed with a hundred and twenty machines in Bengaluru’s Peenya Industrial Area, Viveck Jayant Shah is juggling phone calls and issuing instructions to subordinates, as he surveys the growing number of machines that have been shut.
Kaizen CNC Centre, the company he has been running for over a decade, has ordered that only 18 of the 120 machines remain operational; 102 of the machines, used to make components for diesel engines, are idling. These components are usually sent to Bosch — which then supplies the engines to Maruti and Mahindra. Until May, Kaizen employed three shifts of workers through the week.
Two hundred of the 320 workers have been ‘let go’ between July and August, as stocks started piling up and order books remained empty. In a first-floor alcove, Dhanraj Shetty, Floyd Sequeira and Nagaraju are wondering about the oft-thought-of question: what next?
Young graduates of engineering courses, they all joined Kaizen over the last two years, fresh out of their colleges. "We took up mechanical engineering because we thought it was evergreen — there is never a dearth of jobs in this," Shetty says, uncomfortably aware that they are the last three standing as far as engineers in the company are concerned. Five others were asked to leave over the past month. Whenever there was a need, these engineers started operating machines themselves, not just because it keeps them occupied but because the workmen have anyway been sent home.
“I’m an engineer but we are operating machines now. The company is in a crisis. So we are insecure about our jobs,” he adds, wondering how they ended up this way after having completed challenging engineering programmes. “Those who worked under us have moved out. We do their jobs. A day might come when we would have to move out too,” says Sequeira, worry writ large on his face.
Ever since their order books dried up, they realised that they were already over-loaded with stocks that were not getting picked up by the customer they were meant for. As Maruti’s cars remain unsold, it’s not making as many of them as before. And it doesn’t buy the diesel engines it needs from Bosch. And Bosch doesn’t need the fuel injection pump parts that Kaizen supplies. The cascading effect has hurt thousands of small and medium enterprises that line the roads of the Peenya Industrial Estate.
Known as Southeast Asia’s largest industrial cluster, Peenya on the outskirts of Bengaluru has always prided itself as the go-to place for all kinds of manufacturing – “from safety pins to aeronautical parts, everything is manufactured here”, industrialists love to say.
Kaizen’s human resource department head Walter D’Souza looks a broken man, as he tries to keep up morale in these tough times. “This floor used to be so busy that there was no place to even walk around. The emptiness is stunning," he says.
Stocks used to be lifted and ferried to customers within three days at best, but now the components are preserved in oil-filled trays to prevent rusting, as they are already piled up for over three weeks.
Company director Shah throws his hands up when asked about the slowdown. "This is the craziest thing I have seen in my life. And it is so unnecessary. It was created... such a bad idea,” he says in exasperation.
Shah sees the automobile sector slowdown mostly as a by-product of the shift from Bharat Stage (BS) 4 emission standards to BS 6 that is mandated by the central government from April 2020. He invested in machines to shift from BS 3 to BS 4 just two years back, and with the requirements changing, nobody is buying those vehicles any longer. Everyone waiting for April, he says.
Besides, the move to have electric vehicles as the norm for two-wheelers in five years has put people off purchases further. “I know that EVs are the way forward, but you need infrastructure for it. And you could have just pushed the BS 6 vehicles from 2025, offering it as a premium product along with EVs. What was the hurry to bring in BS 6 next year, barely two years after BS 4?” he asks.
Barely half a kilometre away, Sobyasachi Biswas has closed down one of his two plants at Cosmos Engineering. The remaining one operates two days in a week. The eerie silence that he takes us through in his small factory is telling. A former employee of Ashok Leyland, he opened Cosmos Engineering almost 24 years ago. He supplies as many as 200 components to Leyland, including many for their defence vehicles. He supplies other components to other infrastructure companies, but Leyland had by far kept his machines most busy.
With his main customer announcing no-production days almost 16 days this month, and many days over the last two months, he decided to close down one unit entirely mid-August.
"We have 50-55 workers, they are all permanent employees. Now, the days we are not working they get 50 per cent salary. The days they work they get full salary. This is work that requires precision; we have trained them all. It took 20 years to reach here, but in this market situation, we cannot survive. Today, the building is ours, the machinery is ours, so we are sustaining by keeping them on our rolls, but for how long?” says Biswas, sitting in an empty office.
The entrepreneur says he has held meetings with top executives of Ashok Leyland, but hasn’t been given any assurances that things will improve for at least another four months.
“Make in India, making in India, all that talk is going around. But where is make in India? We have never seen such bad days,” he says. He rode the recession in 2001 too, but even then he had enough work to operate machines seven to eight hours daily. Now, it's not even an hour's work a day. He has four months’ stock but no one is buying. He also supplies to infrastructure engineering companies and construction companies – but even those are facing a market downturn.
If Cosmos has shut shop, its neighbour, Abhimanyu Shaw, is thinking about it. His company makes hydraulic sealing systems for all kinds of vehicles and has suffered losses worth crores over the last six months, Shaw says. His plans to import three new machines for a new plant is on hold. In fact, construction of the new plant on the outskirts of Bengaluru is on hold.
We do not know how to continue like this… We have bank liabilities... If we continue like this, in four to five months I think we will collapse,” says Shaw, managing director of AAA Hydraulics (India) Pvt Ltd.
Company after company is cutting back on raw materials they buy, unsure of orders they will get. Costs are going up as they no longer purchase materials in bulk. And companies like Unnathi CNC have decided to cut down on work they were sub-contracting.
“Our business is down by about 50 per cent. Overall in Peenya itself the business is down by 50 per cent… as much as 70 per cent in some companies. We used to outsource our production orders to nearly 20-22 smaller companies, since we got orders above our capacity. Now we are only giving work to four to five companies. At least 15 smaller units depending on me have no work today,” says Sandeep G Parvatikar, director of Unnathi CNC Technologies.
At the Peenya Industries Association, where over 6,000 of the 10,000-plus MSMEs of the area are members, regular brain-storming sessions have been on for over a month now on how to tackle the crisis. These MSMEs – most of them involved in machine tools, auto components and packaging – have a combined annual turnover of 30,000-plus crore rupees. They employ more than 8 lakh people, at least 40 per cent of them women.
As an industrial body, they have met with top ministers like Nitin Gadkari and Nirmala Sitharaman. But their suggestions on boosting the manufacturing sector or pleas for easier GST norms have mostly gone in vain. They are bearing the brunt of the economic slump down the line, taking jobs and livelihoods with them. And those in the business warn that what seems like an economy crisis now won’t take long to become a social problem.
“The unemployment that people are talking about – 3 or 4 lakhs – that’s for big companies. Where is the data for the vendors of these companies? Some vendors have 500 to 600 employees. Have you taken note of those people? The figures will be huge, but that data is not available. Then there will be law and order problems. We have eight lakh people in this area. Once they don't have jobs, what will they do? They have families. Anything can happen. We are worried about that also,” says BIswas.
D’Souza, the HR head of Kaizen, is more direct.
“What happened when we told our employees to go was a very sad situation. Of these, at least ten per cent or five per cent may become miscreants. They will join street gangs, pick up bad habits, get involved in crimes, chain snatching, etc. To avoid this, we must give them jobs. Otherwise, how will they survive?” he asks in anguish.
The slowdown can no longer be thought of as a standalone demand-supply imbalance in the market. It’s a downturn that is thirsting for better policies for the manufacturing sector. And considering that the small and medium enterprises are among the best job generators in the country, this slowdown could have a major impact on social harmony. Job losses could amount to as much as 30 per cent of the cumulative workforce in the region.
“This area has mainly micro and small industries, which are labour-intensive. We have sent requests to state and central governments. But whatever data we give is not taken seriously by authorities. One issue is slackness of the market, another is government policy. Overall, orders are hit by 50 per cent, and our industries are dying," says HM Arif, secretary of the Peenya Industries Association.
Srinivas Asranna, the association’s president-elect, blames the slack trade directly on government policy, and says most factories are hoping for some hand-holding. "The Siddhartha case (suicide of the Café Coffee Day founder)… you saw what happened,” he says, his tone bleak. Most industrialists feel there is no hope of any revival at least for the next four to six months.
“More than 60 per cent of industries here are affected by this. It has gone on for eight continuous months now, and it will go on. They could all face closure. We don’t have any talk of a stimulus package so far,” says DT Venkatesh, a past president of the association.
The problems are manifold – zero sales and zero orders, GST mismatch of taxes for different things, delays in GST remittances (“I’m almost ending up as a financier to the client, the delays are so much,” says one industrialist), no firm decisions from governments, bank loans that pile up on interest (and no word on restructuring them). But there are solutions also, Shah, director of Kaizen, says.
“There is a fundamental flaw. BS 4 was introduced only two years ago. We could have let it stay till 2025, then we could have leapfrogged to BS 6 and EVs in 2025. That would have given us five years to prepare for both. You need infrastructure for EVs and we need that much time to build infrastructure. This is India, we are slow. It is still not too late. It just needs an extension of BS 4 vehicles till 2025. If someone is listening right now, they need to do this course correction. The market will bounce back then, but correct it soon. This confusion in the market between BS 4 and BS 6 has everyone waiting,” he says.
At the time the decision to move to BS 6 was taken in such a short period, nobody considered the job losses, the impact on the technology developed and the people supported by BS 4, he says.
“I don't understand the reason for this change from BS 4 to 6 in such a short amount of time. There is no logic. There were so many things happening in this country. Why would we suddenly destroy an entire ecosystem of BS 4? I realise the prime minister is trying do shock and awe, but there are consequences. A lot of people will lose their jobs, we will lose ours. We may not even exist. There are serious repercussions. Our businesses have melted away as we see it. Nobody knows what is happening,” Shah says, visibly agitated.
The slowdown is spreading fast, with no one to put brakes on it.
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