Deeply concerned by the economic impact due to the lock down in the country caused by COVID-19. CMAI conducted a Survey amongst its members to get a sense of how the Members were facing up to the current circumstances and how they were forecasting the period after lock-down is lifted.
An analysis of the first 1500 responses, indicates the significant crisis is brewing in the Domestic Garment Industry. Only a comprehensive support package from Government can cushion the potential collapse of the Industry.
Several important measures have been announced by the Government, but it is clear that the Industry, especially its MSME members which constitute 90% of the industry, needs more support. Wage subsidy and Working Capital support for the long working capital cycle is the need of the hour.
HIGHLIGHTS OF THE SURVEY:
- 20% OF THE RESPONDENTS COULD CLOSE THEIR BUSINESS AFTER LOCK-DOWN
- 59% ARE EXPECTING A REVENUE DROP OF MORE THAN 40%, AND 29% BETWEEN 20% TO 40%
- 81% HAVE RECEIVED CANCELLATION OF ORDERS FROM THEIR BUYERS
- 80% BELIEVE THEY WILL NOT BE ABLE TO SUSTAIN CURRENT WORK FORCE WITHOUT GOVERNMENT SUPPORT
- 98% ARE EXPECTING THEIR PAYMENTS TO BE DELAYED
- 43% EXPECT THEIR INVENTORY TO INCREASE BY MORE THAN 40%, AND 47% BY BETWEEN 20% TO 40%
ANALYSIS OF THE SURVEY:
- DROP IN SALES: Demand in Apparels May Shrink by Almost 40% in Year 2020
1500+ CMAI Members with sales of about Rs. 60,000 crores and employing 400,000+ people, have reported that there could be more than 40% drop in demand after the Lock Down. Based on this, CMAI which has close to 4000 members primarily in the Domestic Branded Apparel Manufacturing, believes that the Domestic Apparel Industry could take a Hit of Almost 1 Lac crores due to the lock down and the expected significant slow down in economic growth once the lock down is lifted.
- POSSIBLE JOB LOSSES: Upto 1 Crore Jobs are at Risk
The estimated drop in sales would mean that almost 50 lacs jobs in the Apparel Industry are at risk. With a global slow down, and the cascading effect on other sectors of the Textile Industry, almost 1 crores job may be lost in Textiles & Apparels alone.
- DOWN SIZING OF OPERATIONS:
80% of the members who participated in the survey have indicated that they will need to down-size their organisation immediately. A minimum 30% reduction in employee count and about 20% reduction in salaries for all continuing employees is the action that CMAI Members are likely to take to ensure survival after the lock down is lifted.
- WORKING CAPITAL CRUNCH AND LOSSES DUE TO BAD DEBTS, EXTENDED CREDIT, AND INVENTORY PILE UP:
90% of the Members expect 30-40% increase inventory due to Zero sales during the lock down. Further 100% of Members are worried of collection from trade post the lock down. 25% of the collections may become bad-debts and members expected a minimum 90 days additional delay in collections. The choking of working capital, will lead to a delay in reviving factories and thus 75% of the members expect normalcy in the market only in FY 2021-22.
- POSSIBLE CLOSURE OF UNITS: 20% of Garment Factories could close down
20% of the Members, have indicated that they may consider closing down their business, as they will not have the required additional resources to pay for costs during lock down and the inevitable slowdown in the economy.
The survey is the reflection of the bleak future that awaits the Apparel & Textile Industry in India, due to shut-down of the economic activity in India.
CMAI, has appealed to Hon Prime Minister, Ministry of Textile, Government of India, Finance Ministry, Government of India and various State Government to provide support to the Domestic Apparel Manufacturers to overcome the impact of lock-down and reduce the potential job losses.
CMAI’s Appeal to the Government:
- WAGE SUBSIDY:
(A) 50% Wage Subsidy up to Rs. 5,000/- per month for 5 months from March 2020 to July 2020
(B) PF & ESIC Contribution of Employer and Employee to be done by Government for 3 months (March to May 2020) for employee drawing wage not more than Rs. 15,000 with no cap on number of employees in the company.
- INTEREST SUBVENTION: All Banks to offer Interest Subvention of 5% on total borrowings.
- WORKING CAPITAL: 25% additional Working Capital to be made available on a Mandatory Basis (not to the option of the Bank), subject to available Drawing Power on revised norms.
- MORATORIUM: While RBI has already allowed 3 months Moratorium on Terms Loans and Working Capital Loans, considering the long working capital cycle, this needs to be extended to 6 months. Further, Purchase Bills Discounting and Letter of Credits dues must also be given the 90 days Moratorium.
- SEBI: Must be instructed to provide relaxation in rules for Capital Raising for Listed companies. due to the sudden fall in stock prices. Further, SEBI must also provide a 90 days moratorium on Listed Debt Instruments which are used for financing Working Capital and Term Loans.
- ELECTRICITY: Waiver of Minimum Demand Load charges for 4 months from March 2020 to June 2020. State Government to waive Electricity Duties for 4 months.
- GST: Allow additional 90 days for depositing of GST Dues for March and 30 days for GST for May & June 2020
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