Home / Economy / MSMEs hugely impacted by power crisis, fear job losses

Small businesses have been hit disproportionately hard by the continuing power crisis, with several having to shut operations during outages, causing production losses, and others with power backup forced to bear increased costs during the second half of April, when cuts were more frequent and prolonged, said industry executives.“Power outages lead to loss of production opportunities and the usage of power backups nearly doubles the cost of power," said Anil Bhardwaj, secretary general of the Federation of Indian Micro and Small and Medium Enterprises (Fisme). He said the cost of power soars to 12–13 per unit in case of power backups from the 4–6 per unit generally charged by distribution companies.

With the sharp rise in the cost of power, the overall cost of production for micro, small and medium enterprises (MSMEs) rose by 4—5% in the second half of April, said Animesh Saxena, former president of Fisme.

Further, it is only the MSMEs which generally have power backups in the form of diesel-powered generators. Micro enterprises generally do not have such backups, given their high operating costs, which forces them to shut operations during power cuts.

MSME clusters across the country—from Delhi-NCR (Faridabad, Gurugram, Noida and Sonipat), to Ludhiana in Punjab and Coimbatore in Tamil Nadu —felt the impact of the power crisis last month.

Although industries have faced power outages in the past, too, the current crisis gains more significance as businesses are now in a recovery mode after the massive blow from consecutive waves of the pandemic and the resultant lockdowns and restrictions.

Vinod Kumar, president of the India SME Forum said post-covid, some industrial units have been working 16 hours a day trying to recover from the pandemic lows, and these are the very businesses that have been most severely hit due to the outages, which mostly occur in the evening due to peak power demand.

“There are a lot of units which are working in the night also and some of them are in the continuous process (of manufacturing)," said Saxena.

A similar power shortage scenario occurred last October. It ,however, lasted for a shorter time than the ongoing crisis, leading to a bigger impact on small businesses.

“Last October, it was a very small period. That was more of a panic, rather than actual shortage. Then we had not faced much problem. This time, we were all caught unawares," said Saxena.

Frequent and long power cuts, MSME players say, lead to a vicious cycle, impacting production, delaying deliveries, lowering revenues, causing job losses and, eventually, affecting economic growth. The sector is among the largest employers in the country and looming concerns of another covid-19 wave, coupled with the power crisis has exacerbated problems faced by the small businesses, they said. MSMEs, apart from being major employers, also contribute around 30% to the Indian economy.

Citing a survey by the India SME Forum in 2019 in Jharkhand, Kumar, the president of the forum, said non-availability of uninterrupted power could cost small and medium enterprises in the state about 3,000 crore- 3,500 crore annually. He said the survey indicated that SMEs across the country could incur thousands of crores in revenue losses.

“Along with profitability, the power outages also affect the debt level of the businesses as bank repayment also needs to deferred in case of revenue losses," Kumar said.

Queries sent to the ministry of micro, small & medium enterprises and the ministry of power remained unanswered till press time.

Rituraj Baruah
Rituraj Baruah is a senior correspondent at Mint, reporting on housing, urban affairs, small businesses and energy. He has reported on diverse sectors over the last six years including, commodities and stocks market, insolvency and real estate. He has previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.
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