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Photo Bloomberg

Auto component makers urge govt for bailout package to offset Covid -19 impact

  • ACMA wants the government to ask banks to relax the bad loan classification norms and ease the borrowing norms
  • The component industry will lose Rs1,000 crore to Rs1,200 crore in revenues due to the production loss, says ACMA

The Automobile Component Manufacturers Association of India (ACMA), on Friday, urged the union government to introduce host of measures to protect the automotive component manufacturers from the adverse aspect of the Covid – 19 pandemic on their businesses. As most of the automobile manufacturers have stopped manufacturing due to the pandemic, component manufacturers – mostly small and medium enterprises – are finding it tough to manage their cash flows.

According to the lobby group, the union government should ask the banks relax the bad loan classification norms for such companies and ease the borrowing norms. These manufacturers should also be exempted from paying utility bills like electricity for a certain period.

Since most of the component manufacturers have raised debt to invest significantly in upgrading their products to BS 6 norms, the disruption in production caused by the sudden outbreak of the pandemic at the time of the transition might lead to increase in non-performing loans from the sector.

According to the internal estimate of ACMA, the component industry will lose 1000 crore to 1200 crore in revenues due to the production loss.

According to Deepak Jain, president, ACMA, the most immediate concern of the sector is to manage the cash flows and the whole sector needs a bailout from the government and companies should be exempted from paying utility bills like electricity, customs and other duties.

“The recent steps taken by the RBI and government to help companies raise money for working capital needs and deferment of Goods and Services Tax filing are welcome steps but they are not going to be enough. Unless the industry survives, we would not be able to take care of our employees," added Jain.

As the number of persons infected with the novel Coronavirus rises significantly in India, leading automakers, across segments, and their component manufacturers, decided to shut down respective manufacturing capacities to protect their factory staff and comply with the state and central government’s efforts to ensure social distancing.

“ACMA has issued an advisory to all its members to maintain safety and security of all permanent and contractual employees, ensuring no layoffs and timely salary for the month of March. In fact, over one lakh contractual employees have already been paid their salary for the month of March," the lobby group said in a statement on Friday.

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