Depleting factory assets, market shutdown put metal SMEs' survival at stake

These units continue to incur costs like wages and interest on loans; worse, shipping lines and container services continue to dump them with demurrage in defiance of official directives

Small and medium enterprises (SMEs) engaged in secondary metal production are facing huge financial stress due to the gradual depletion of their factory assets, further extension of the nationwide lockdown and consequent delay in market opening. To make matters worse, these units continue to incur fixed costs like wages and interest on working capital loans.

For units that depend upon imported raw materials, a steep rise in the cost of inputs due to levy of demurrage and detention charges during the lockdown and difficulty in availing further working capital loan have been causing additional stress.

"Around 6,000 SMEs and micro SMEs (MSME) engaged in secondary metal production through recycling of scrap are struggling to pay salaries to their employees and meet other financial obligations. These include fixed costs like rent, electricity and water bills and interest payments due to unavailability of funds and hefty demurrage and detention charges. The sector is in dire straits and needs immediate government’s intervention,” said Sanjay Mehta, President, Material Recycling Association of India (MRAI).

Currently, recycling plants are shut due to that nationwide lockdown that started on March 25.

In the absence of income generation, the cash flows of these units have deteriorated. Despite this, many shipping lines and CFSs/ICDs continued to impose demurrage and detention charges from them.

The Container Fright Stations Association of India (CFSAI), the representative body of CFSs and ICDs across the country has justified the levy of demurrage and detention charges. Foreign shipping companies have refused to waive off any such charges despite directives to the contrary from various Indian authorities.

“Such an indifferent and unsympathetic attitude on the part of the shipping lines and CFSs across India will hit the sustainability of recycling units in India,” said Mehta.

Containers holding imported scrap worth several lakhs have been stranded, impacting the industry miserable and the livelihood of scrap sorters and labourers. Women comprise about 30 per cent of the industry’s workforce, and are largely engaged in segregation of the scrap before it is melted.  
 

Mehta had urged the government to declare scrap recycling as an essential service and provide additional credit to fund the livelihood of lakhs of labourers. A waiver of interest rate on late payment of customs duty would help the industry as well, added Mehta.