Market Slowdown Effect: Block Closures In Tata Motors, 30 Steel Companies On Verge Of Close Down

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market slowdown in india

A slowdown in the Indian economy is now showing an impact on the businesses and industries forcing many to put the shutters down. Industries especially the housing auto ancillaries located in and around the Adityapur Industrial Area (AIA) near Jamshedpur are facing a tough time with Tata Motors issuing orders of series of block closures from the past month.

According to reports, around 30 steel companies are on the verge of closure whereas shutters of a dozen have already been put down.   

Tata Motors Badly Hit By Recession In Automobile Sector 

The recession in the automobile sector has hit Tata Motors badly due to which the company has gone for a block closure for the fourth time since July this year. This time the block closure is from Thursday to Saturday apart from Sunday already being a holiday.

The company has asked its temporary workers’ (Y-6 workers) separation of 12 days which means they have to sit in the house. Permanent employees have been asked to rejoin the office from August 5 whereas Y-6 workers will be rejoining on August 12. 

The sluggish market demands have forced Tata Motors to opt for a series of block closures. Since the past two months, the production has been restricted to only 15 days per month. According to the Union sources, the company has received orders only for 1 week’s production in August. 

Inder Agrawal, president, Aditaypur Small Industries Association (ASIA) said, ‘Recession in the auto sector is nothing new…It comes every two-three years. I met Tata Motors Plant Head today who said that the company might have to take another block closure of 3-4 days after which things would normalize. We expect things to be back on track after September. The company has got 40% fewer orders for its vehicles this July compared to the corresponding month last year. Some of our companies are working in a limited capacity while some have opted for maintenance work.”

Steel Sector Affected By Hefty Power Tariff Hike

Steel sectors have been affected due to exorbitant power tariff hike. The steel industries use induction furnaces where electricity is the basic raw material. This hefty hike in power tariff has forced around 30 companies to opt for closure whereas more than a dozen have already started shutting down their shutters. 

According to Inder Agarawal, 25-30 steel sector companies have shut down their shutters post exorbitant hike in the power tariff by the state government from  April 2019. He added, “The production cost has spiraled… They have no other option but to close down.”

market slowdown in india

JBVNL is the leading supplier to most of the companies in Kolhan. It is currently paying the highest tariff of Rs.5.50 per unit as compared to the cheap rate of Jamshedpur Utility and Services Company (Jusco) and Damodar Valley Corporation (DVC) the two other power suppliers in the region. The companies in Giridih, Ramgarh, Deogarh, Patratu, and Ranchi get their power supplies from DVC and hence can produce ingots at much cheaper prices as compared to the companies that receive power supplies from JBVNL.

Inder Agrawal said, ‘DVC charges Rs 2.95 per unit while the Jusco rate is Rs 3.50 per unit of power consumed. The government should withdraw the tariff hike immediately and also strictly implement scrapping of 15-year-old vehicles to boost both the sectors.’

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