Lockdown Effect: As labour participation hits all-time low, production of essential goods slows; retailer stocks dwindle

Aashish Aryan, Pranav Mukul
coronavirus, coronavirus impact on India GDP growth, essential goods, essential goods supply, essential goods production

For online players too, a shortage in supply from bigger brands has meant higher reliance on private labels. (File Photo/Representational)

A fall in the country’s labour participation to an all-time low and a massive disruption in transportation system that has taken over 90 per cent of trucks off the roads has culminated into manufacturers of essential goods slowing down production with no sight of recovery — particularly with expectations of the lockdown being extended beyond April 14. For retailers, this has resulted in unavailability of sufficient items to restock their supplies, which have slowed down for some brands and completely halted for others.

Taking a note of the situation, the Ministry of Home Affairs has written to all states pointing out that in light of loss of production due to various factors, “the possibility of inventory building/hoarding and black marketing, profiteering, and speculative trading, and the resulting price rise of essential goods cannot be ruled out”. Further, the Centre has even approached the states to seek facilitation of enough labour availability in factories, warehouses, and transportation operations of essential food and grocery items.

In a letter to chief secretaries of all states and union territories, Secretary, Department of Consumer Affairs Pawan Kumar Agarwal wrote: “I would also like to bring to your notice that several companies have reported difficulties in getting labour for their operations. Local administration may be advised to facilitate in ensuring availability of labour in factories, warehouses and transportation and distribution operations of essential food and groceries by appealing to house owners, societies and villagers to allow workers to go for work”.

In a report released Tuesday, the Centre for Monitoring Indian Economy (CMIE) had noted that in March 2020, “the labour participation rate fell to an all-time low, the unemployment rate shot up sharply and the employment rate fell to its all-time low. The employment rate fell to an all-time low of 38.2 per cent in March 2020.”

Among major FMCG companies, sources at Hindustan Unilever (HUL) said the company’s production units were operating at nearly 60 per cent of their pre-shutdown capacity, they also maintain that it would be too early to tell if the supply chain would be back to normal if and when the lockdown measures are eased. Other large domestic FMCG companies maintained that the problems of procuring raw material and shipping finished products remained at most of their units.

“The supply chain for any single FMCG product typically consists of 20-30 components and their seamless movement is absolutely necessary to ensure continued production and uninterrupted supply of the final product to consumers. It’s extremely important that the guidelines issued by the Centre are properly communicated to authorities across states and to local police as well,” Shahrukh Khan, executive director—operations, Dabur India, said.

Dabur, which has ramped up production of essential hygiene products and medicines to meet the growing need, had earlier too said it was facing problems even with availability of raw material and packing material.

Kultaran Singh Atwal, president, All India Motor Transport Congress, told The Indian Express that as of Wednesday, only less than 10 per cent of 90 lakh trucks in India were plying on the roads.

At ITC, among the largest manufacturers of food and hygiene products in India, factories have been operating with restricted number of hours and reduced workforce in line with the approvals received. “The company has received approvals from a number of state authorities for manufacturing of essential commodities. Efforts are being made to ensure that supply chain functions smoothly across the country despite challenges of manpower shortages and availability of trucks,” a spokesperson said.

The slowing down of gears at the manufacturing stage of FMCG goods has also impacted other downstream segments. A spokesperson for Walmart India, one of India’s largest B2B wholesalers, said: “There are some challenges in securing sufficient supplies due to production shortages from manufacturers or transportation of the products to our locations, but we are working closely with our suppliers and with local authorities to minimise and address these challenges.”

For online players too, a shortage in supply from bigger brands has meant higher reliance on private labels. “We have our private label, too, where we have ramped up manufacturing significantly. With this, we are able to ensure that any shortage of supplies from large national brands is supplemented with our private labels,” Bikram Singh Bedi, president—strategy and new initiatives at Grofers, said, during a CII webinar.