Large stimulus critical for re-starting economic engine: MD, Ashok Leyland

Supply chains need to be re-started, migrant labour needs to come back to work (in a systematic and safe manner), and consumer demand needs to be triggered, says Vipin Sondhi

Commercial vehicle (CV) sales were under pressure due to the economic slowdown, the GST regime, and axle-load norms, among other factors. The Covid-19 pandemic created more troubles for the sector — overall CV sales in the country reported 89 per cent drop in March. Vipin Sondhi, managing director of Ashok Leyland, tells T E Narasimhan that a stimulus package would be critical to kick-start economic activity after this long period of disruption. Edited excerpts:
 

How do you see the measures of the government and the Reserve Bank helping the economy?
 

The measures taken are in the right direction. They are taking calibrated steps to address the situation. The lockdown is a critical step to flatten the curve of the pandemic and avert a health care crisis. At the same time, the government will have to manage the state of the economy, especially for the stressed sections of the society — the daily wage earners, the agriculture sector, and the micro, small and medium enterprises (MSMEs).

Some measures of support to be considered (for MSMEs) would be easy access to working capital and liquidity through banks and non-banking financial companies (NBFCs), interest-free and collateral-free loans, incentives to help them pay salaries and wages, extension of the non-performing assets (NPAs) recognition period from 90 days to 360 days, ensuring that all pending payments to industry/MSMEs are cleared by government departments and public sector firms. Ashok Leyland has prioritised settlement of dues to MSMEs and instituted a process of paying the MSMEs prior to the statutory payment due date.

What needs to be done to boost consumer sentiment?

There should be gradual opening up of other sectors to revive economic activity and enable employment (especially for casual, and daily wage workers). Clear operating guidelines should be provided to ensure social distancing and preventing the spread of the virus. Some of the demand-side interventions to trigger consumption (individuals, government and companies) would be accelerating infrastructure spend of Rs 1.7 trillion to provide immediate impetus to the economy. 

Significant amount of this money can go towards each of the 700 districts in the form of low-cost housing and road construction, building agriculture warehousing and cold storage chains near farm gates, scrappage policy for automotive (>15 years) to incentivise new purchases, special package required for airlines, bus operators, hospitality, tourism, and retailers, export stimulus, and re-opening of port operations.

When do you think CV sector will revive?

While it is difficult to predict when the economy would start turning around and, in turn, help the CV sector, a stimulus package would be critical to kick-start economic activity after this long period of disruption. Supply chains need to be re-started, migrant labour should be brought back to work (in a systematic and safe manner), and consumer demand needs to be triggered. Unless the eco-system through the value chain opens, a truck cannot be produced or sold.
 

If the government allows you to open up on April 20, will you be able to start production?
 

We will restart operations in a safe and sustainable manner. We are putting in all measures for operating after the lockdown by accepting the new normal. We have developed workplace policies that provide a safe working environment, while enabling sustainable productivity levels. Supply chain will be a challenge to start with, as state borders were closed and goods movement has just about commenced.

Whatever is in the pipeline, we will be able to receive. We will scale up as our supplier base cranks up and customers resume buying. However, a sizeable stimulus is critical to re-start the economic engine. The CV industry, with Ashok Leyland, are an integral part of that engine.

What kind of edge you will have when the sector opens up?
 

We have just launched our Modular Truck Programme. We are extremely excited. It is new. It is different. It is state-of the-art.
 

What lessons companies like Ashok Leyland have learnt during the lockdown?
 

Companies or their major suppliers that have an import-dependent supply chain have been affected. Ashok Leyland as such has not been affected as much as our supply chain is. We believe India has the capability to manufacture all critical components and must reduce dependence on imports.
 

There is a tremendous opportunity for Make in India. The government must seize the opportunity as multinationals look for safer manufacturing areas outside of China.