With Rs 1,000 – 1,200 Cr Per Day Loss, ACMA Seeks Relief Measures

With a three-week lockdown announced by the Government, the production has come to a stand-still in the automotive industry across the country. Auto Component manufacturers, especially the Tier-2s and Tier-3s, have maintained that they are facing severe hardship on front of cash flow, which if not immediately addressed will lead to insolvency of several companies, especially the Tier-2s and Tier-3s.

ACMA has also maintained that there is no clarity on how the market will pan out in the ensuing months, thus further eroding the industry’s confidence. It is estimated that the component sector is facing production loss of Rs. 1,000 – 1,200 crore per day

Discerning the fact that the situation is even worse for small and medium firms whose solvency is being challenged, ACMA has requested for the following: • Support for Working Capital – Relaxation of borrowing norms & statutory payments • Norms for NPA recognition to be eased by extending moratorium on payment of principal and interest by at least 1 year • Relaxation in fixed electricity charge • Relaxation in of levy demurrage charges for at least 7 days for import cargo clearance.

Commenting on this situation, Deepak Jain, President ACMA, maintained, “With complete stoppage of production in the vehicle industry and scarcity of working capital, the situation in the component manufacturing units, including the tier-2s and tier-3s has become quite acute, threatening their survival. We have requested the government for helping us with immediate relaxation of borrowing norms & statutory payments, extension of moratorium on payment of principal and interest of loans for a year, among others. We are also seeking support of SIAM and the OEMs to ensure minimal disruption of the supply chain.”

It is to be mentioned that the Auto Component Industry contributes 2.3% to India’s National GDP, 25% to national Manufacturing GDP and employs over 50 lakh people. In 2018-19, the turnover of the industry stood at USD 57 billion with USD 15 billion in exports. The sector, largely dominated by SMEs, exports to almost all of the world’s leading vehicle manufacturers and Tier 1s.