Cyclone Vardah hits exports of auto components & aqua products from Tamil Nadu

Sreenivasa Rao Dasari 

The devastating impact of cyclone Vardah has badly hit the export performance of auto component manufacturers and the aqua sector in Tamil Nadu. Chennai is also known as the Detroit of Asia as it accounts for over 60% of the country’s automobile exports. Though Vardah did not affect the aqua units as they are located far from Chennai, it badly impacted the container movement as floods disrupted the activity at the port. The Federation of Indian Export Organisations (FIEO) urged the Centre and the Tamil Nadu governments to take a holistic approach in order to minimise the impact of natural calamities on the industry and export logistics. 

After the floods that affected the city last year, Chennai was limping back to normalcy, trying to pick up the pace when Vardah struck again. Tamil Nadu is gradually losing its share of aqua exports to neighbouring state Andhra Pradesh as frequent natural calamities have been disrupting the industrial activity in the port city, observes Federation of Indian Export Organisations (FIEO) while forecasting 15-20% drop in exports for 2016-17 financial year. 

FIEO has estimated a loss of Rs.200 crore for MSME sector in the auto component manufacturing activity in December month alone. 

“Chennai has become a hub not only for global vehicle manufacturers but also for the auto component manufacturers. The MSME sector’s focus on product innovations, quality and competitive pricing helped them become competitive in the global market. Chennai has excellent manufacturers in the MSME sector who supply auto parts and accessories including critical parts to OEMs across the globe. This export business totally depends upon just in time delivery schedules and Vardah disrupted everything,” expressed Dr A Sakthivel, Regional Chairman, FIEO-Southern Region over the plight of the auto component and aqua exporters. 

Speaking to The Dollar Business, Dr Sakthivel said: “Last year’s flood put many of the progressive MSMEs out of gear who have lost heavily. As several industrial sectors are just regaining momentum after that shock, Vardah came as a jolt to the industry. Apart from serious damages to the properties, the entire production process has been halted due to power outage and other infrastructural problems. Industry workers are not able to report to duty due to serious damages incurred to their personal properties and transportation facilities. Hence any break in the supply chain will seriously affect the business. It is estimated that the industry may lose around Rs. 200 crores worth of business in this month.” 

A series of problems are creating hurdles for exports from Tamil Nadu. Dr Sakthivel further elaborates: “Tamil Nadu is slowly losing its share on aqua exports to our neighbouring state like Andhra Pradesh which is making headway in developing an eco system for aqua culture-related industries. Tamil Nadu exported Rs.3,200 crore worth of seafood last year. However, Chennai has a negligible share as a majority of the units are located in Kanyakumari district alone. After the tsunami struck in 2004, many major units relocated from Chennai. Still, environment and manpower related problems daunt the industry. Other reasons including environment and labour issues also need to be addressed.  As marine exports from Tamil Nadu fully depend on sea catch, there will be a negative impact of around Rs.100 crore in this month.” 

The Centre and the State governments have more responsibility in protecting the industry from natural calamities and help exporters sustain export performance, FIEO said. 

“While we appreciate the efforts taken by the State government to restore the normalcy quickly, we need to analyse and come up with a proper plan of action to see that natural calamities like Vardah will affect us to a minimum. We need to invest in better infrastructure, be it in road, electricity distribution, town planning, etc. We need to study how other developed countries face similar natural calamities frequently and what measures they take for ensuring minimum losses to people and property,” suggested Dr Saktivel. 

FIEO is in the process of evaluating the business loss, damage to property, infrastructure facilities, etc. 

“The Centre and State governments may consider waiving interest on working capital loan for half yearly period for the affected units and also provide adequate funding at a concessional rate of interest for replacement of capital goods,” suggested Dr Sakthivel. 

With $31.25-billion exports in 2015-16, Tamil Nadu is the third largest exporting state in the country. During the current financial year from April to September 2016, Tamil Nadu recorded exports to the tune of $13.27 billion. Considering this, FIEO forecasts 15-20% drop in exports for the 2016-17 financial year. 

According to FIEO, other major sectors such as engineering, textiles and readymade garments, leather and agro-food processing units in Tamil Nadu have also been seriously affected by the cyclone. FIEO is in the process of analysing the losses to the industry.  

Dr Saktivel further said, “Issues at domestic level coupled with deprived global trade environment take a toll on the exporters in the state. On the part of FIEO, we are analysing the specific requirements of the industry, which needs policy framework, marketing push and support from State and Central Governments.”