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Manufacturers across sectors are idling production as lockdowns to contain an explosive surge in covid infections have decimated sales, and diversion of industrial oxygen to hospitals has crimped production of raw materials such as steel.

Production of steel has suffered because of the shortage of medical-grade oxygen. This, in turn, has affected industries that use steel as raw material, including automobiles, said industry executives. The automobile industry, which accounts for almost half of India’s manufacturing gross domestic product (GDP), has slowed down substantially as component suppliers and automobile manufacturing companies have decided to stop production at least till mid-May.

Analysts said that automobiles production came under pressure from the first week of April when Maharashtra announced a lockdown. Since then, similar curbs were announced by states such as Delhi, Haryana, Karnataka and Tamil Nadu as infections spread swiftly across India, overwhelming the country’s health infrastructure.

In the slow lane
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In the slow lane

Several leading automobile manufacturers, including Maruti Suzuki India Ltd, Hero MotoCorp Ltd, Hyundai Motor India Ltd and India Yamaha Motor, have either suspended production at their factories or reduced output significantly.

A similar production cut is also expected to impact the steel industry. According to industry data, domestic steel consumption declined 26% in April, and exports fell 26% during the month due to the disruptions.

“The lockdown this year is not like the one we experienced last year since companies are allowed to manufacture which is a positive for the economy and the industry. Exports are still continuing as it is essential that it continues that way for the industry. The domestic demand has fallen but we are expecting it to come back soon once the second wave is behind us," said Sunjay Kapur, co-chair of CII’s Smart Manufacturing Council.

India’s coronavirus outbreak took a turn for the worse in April and has since then been spreading with explosive ferocity across the country. With hospitals running out of oxygen and beds, many states imposed strict lockdowns over the past month to curb the spread of the virus.

With several states under lockdowns, the supply chain network of most manufacturers came under severe pressure, forcing them to shut factories.

Hero MotoCorp, the country’s largest two-wheeler maker, on Sunday extended the production shutdown at its plants by another week till 16 May. Maruti Suzuki followed suit with a similar decision. With most dealerships closed due to the lockdowns, automakers see no point in continuing production.

“Most auto companies and suppliers have stopped production due to rising cases and lockdowns imposed by states, which has forced dealerships to close down. Going by the current caseload, the month of May will be a washout for most automobile companies, and production is unlikely to start in the coming weeks," said a senior industry executive on condition of anonymity.

According to data released by Joint Plant Committee, steel exports fell 26% to 0.95 million tonnes in April from the preceding month, and imports dropped 27% to 0.36 million tonnes. The drop in exports in April has been attributed to the second wave of the pandemic, with ships from India being quarantined at export destinations for 14 days, reducing the demand for Indian exports. Domestic steel consumption also fell 26% to 6.72 million tonnes in April from the preceding month as demand in auto and consumer durables were hit due to local lockdowns.

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