SMI Labels and Packaging Materials

Friday, May 15, 2020

Self-reliant India: Response of and options for MSME Label converters

On the 11th of May 2020 an embattled Indian Prime Minister Narendra Modi, fighting a mammoth pandemic Covid-19 on one hand and facing a dwindling economic scenario on the other, made a clarion call to the nation, calling for his countrymen to support his vision for Atma-Nirbhar Bharat or self-Reliant India. He mentioned the five pillars of Atmanirbhar Bharat as: Economy, Infrastructure, System, Vibrant Demography and Demand. A natural human response to any form of attack is to go on defense however it is dynamism and daring spirit to prompt the nation into an offensive with long term growth perception. It reminds one of what George Washington wrote in 1799, “That offensive operations, often times, is the surest, if not the only (in some cases) means of defense”. In simpler terms “offence is the best form of defense”. The five pillars of the Prime Minister’s vision of a Self-Reliant India were also explained as.

1) Economy, which brings in quantum jump and not incremental change
2) Infrastructure, which should become the identity of India
3) System, based on 21st-century technology-driven arrangements
4) Vibrant Demography, which is our source of energy for a self-reliant India and
5) Demand, whereby the strength of our demand and supply chain should be utilized to full capacity

To achieve the vision, a huge financial package is also being put in place to support and encourage the people, industry and other institutions furthering the cause.  Stressing on the imperative need for going local in mind, he stressed the “make in India” concept to escalate inherent strength of the nation. If the instilled red tapism that has prevailed in Indian bureaucratic system and has refused to die down over the years, does not create hurdles in disbursement to the beneficiaries specially the MSME sector, the large cache of technically educated English speaking manpower in democratic India can deliver the expected results. Expressing his reservations Chennai (South India) based A. Ramesh, owner of Sree Krishna Labels & Solutions Pvt. Ltd. says, “Most MSMEs will be restarting from ground zero and Govt support package has still not reached the banks and it is in the bank’s hand to decide”. This sentiment has been expressed by others as well. As for “going local” or “make in India” concept, as explained by the Indian finance minister on the following day of Prime Minister’s speech, clarifies that it does not mean that the country wishes to be in isolation. It translates into achieving freedom of dependence from global brands for everyday consumption of materials which our youth can provide if their entrepreneurial capabilities are encouraged to produce. It remains to be seen if this package is what will make the industry stand up and applaud and move on.

The Indian self-adhesive or pressure sensitive label industry is completing almost 50 years of existence. In the early years, the production was either manual or simpler and evolving technologies of that time were being used sparingly across India. It is only in the last decade that the industry has risen to global standards in installing technically advanced label printing, decorating, and converting presses comparable to the best in the world. Since most label printing companies are MSMEs, they have faced a big adverse impact of lockdown following spread of pandemic Covid-19. They are mostly family owned first generation entrepreneurs who do not have large industrial groups backing them. Now if they get the financial aid as communicated by the government, it will be difficult and long before the industry bounces back. However, at this time the support as given, is not a compensation of losses incurred by industry, Government is only giving loans that will attract interest and add to the burden of the entrepreneurs. It may be enhanced business for Banks but a burden on industry. From the difficult experience gained during this lockdown, it may still make sense to take the Prime Minister’s appeal seriously towards becoming Atmanirbhar. Surely it does not imply going into isolation shunning everything or all technology that is foreign. Surely it means we use the best capital equipment available across the world to produce end products that are largely local in content. If Indian equipment suffices the need, it should be preferred. However, the industry needs to aim and create products in their factories that are of high standards and eliminate the need for imported products.

Label industry around the country on the contrary is unhappy and distressed at government’s
LMAI President Kuldip Goel
response and decisions to sufferings they are facing and will be facing an even bigger challenge of reduced demand in coming months. The author interacted with label industry constituents in all geographical zones of India and the reaction every where was somewhat similar. Kuldip Goel, President LMAI (Label Manufacturers Association of India) said, “I don’t see any benefit in the package being offered. A Loan being given and repayable in just 4 years is not the support that MSMEs need for losses that they incurred in lockdown facing this pandemic. The instalment and interest will be huge and add to the woes of MSMEs in a burdensome time”. Leading Label stock manufacturer Ajay Mehta Managing Director of SMI Coated Products Pvt. Ltd. is also apprehensive about the losses due to the lockdown, he says, “The governments financial support package is a reflection of its policy of Atmanirbhav, the confidence it has on the Indians to be able to take things ahead, despite all the constraints, by providing funds to take care of the liquidity crunch and not delve into the compensating the losses already  made in these months, as well as what losses would be incurred in the coming months.” Manoj Kochhar of Holoflex Kolkata in the East of India feels there is no direct incentive given, the biggest hit is due to this pause in operations. The Government should have at least made the loans interest free and for longer tenure. It is not easy to deal with banks as they have ways to become selective and find loopholes to refuse or reduce support. Harish Gupta heading Sai Com Codes in Rai, district Sonepat in the Delhi NCR is quite upset at the governments package, “We have been pushed back by two years! The support package is an eyewash and joke on the industry” he says and adds, “Ask anyone if he can easily get a loan from bank, they will make you cry”. He is also worried that workers who went back home are starving and they have no support, they now wish to return but there are no means to come back. LMAI General Secretary Rajesh Nema of Pragati Global Indore in Central India expressed, “Lockdown has taught us to live our life in a simpler way. Govt's package would indeed increase liquidity in hands of entrepreneurs but the interest burden is going to be there. The Govt should have waived off interest for 3 months or at least reduced income tax to lessen the burden.” Sanjeev Sondhi of Zircon said, "Two things are killing; cash flow and manpower shortage. Government initiative looks a big puzzle if you can solve it, you may get something in the end". Accepting life as it comes Harish Gulati Managing Director Alpine Containers Jammu in the northern most part of India said, “The biggest impact of lockdown has resulted in bringing economy to its knees which is beyond any body’s imagination and taught many new lessons out of management books. The tough time is going to be a new normal for quite a long time.” With a divergent response
Raveendran Selvarajan Managing Director at Sel Jegat Printers Private Limited Sivakasi in South India states, “In present circumstances Government has made a good effort to bring about liquidity in market, If the intended support reaches the industry, it will bring buoyancy back into markets”. Summing up Jigesh Dani of Maharshi Labels, Ahmedabad western India says, “Justice delayed is justice denied!” he explains that the corona virus erupted in December 2019, government should have gone into planning to reduce stress on workers and industry, it would then have not led to migration of workers. If you look at the financial package of 20 Lakh Crores, the cost to Government is just 2500 Crores! Please see the table at the end of this article.  Even out this amount meant for them only 20-25% will reach the targeted MSMEs. A small single owner entrepreneur does not have the capability to cope up with the formalities that banks ask for and they finally get tired of pursuing and give up. By the time, the support does eventually reach some, they will be deeper in RED. If the government is earnest in supporting, then they should have transferred the monies straight into accounts…this delay is denied justice.”

To recover from this catastrophe there is need to look within and find the strength as Albert Einstein said, “Adversity introduces a man to himself.” To re-engineer your business we must adopt an operating structure of financial discipline. The adherence depends on profitability and cash flows. The production may appear to be profitable, but a negative cash flow will hamper the march toward self-reliance. Printers need to balance the inflow and outflow all the time and ensure its positive status, it may sound difficult for MSMEs but the present situation has made us realise that we have to be focused on quality customers and not quantity. The latter if not taken care of, will adversely impact your own status in terms of quality as buyers. Costing needs to be in check, for some persons this may translate into integrating backward and forward. Some big label companies may toy with the idea of producing labelstock to cut costs, but that would be counterproductive. It will be prudent to stay with core competence and keep achieving excellence in what you produce. It will also help in maintaining a focus of achieving a quantum jump. The reduction in cost must be in terms of wastages, down time, reduced human intervention, better inventory management and effective logistics. Label stock is the major part of a self-adhesive label and it involves a lot of imported papers. In an effort to localize, our Indian stock producers need to take initiative to reduce the imported content of labelstock and consider using alternative liners and indigenous face materials. They need to interact with paper mills to achieve the localization of these specialty papers. Label printers with support from Labelstock producers need to impress upon print buyers to opt for indigenously produced label materials reducing dependence on imported materials which are not really a necessity.

This leads to the need for better infrastructure and equipment which is a onetime capital investment, amortization of which is quicker as you produce in quality and quantity without wastages but if the equipment is wanting in parameters the impact of higher cost is ongoing for all jobs resulting in reduced profitability. There is now need for printers to implement automation and workflow management. Materials must move in a planned manner without hindrance in the given floor space. Equipment with highly advanced automatic registration control ensuring reduced wastage and setting time help in cost control. Order receiving from customer, approval and processing  for production, make ready (like ink preparation-plates and dies), just in time raw material ordering, final printing, converting, packing and finally logistics to dispatch all with real time targets can all be done through software. The progress of any order can be tracked by the customer, all departments concerned and logistics handlers who are involved with the process. There is virtually no need for huge inventory as materials are received just in time at allocated times and are lined up at designated presses for converting without need of extra worker moving around on shop floor reducing dependence on them. This may look expensive but as mentioned these are one-time costs that get amortised quickly as you produce more.

Systems are which make life easier for the management in label companies. May it be HRD, time management, sales/marketing, customer care, production, order tracking both inward and outward, etc. should all have pre-set systems implemented through proper software that can be accessed by whoever it pertains to with it being limited to his or her area of responsibility or concern. Successful will be those companies that are driven by systems and not by persons. This will surely leave enough time to innovate, create, network and much more to be a part of a vibrant demography.

As the economy of the country if and when it improves and there is more disposable money in hands of consumers, the demand will rise. Demand that has nosedived due to lockdown has impacted economy heavily and created a difficult situation for the label industry which has a direct link to sale of consumer products that need labels and packaging. The present boost promised by the Prime Minister is expected to bring the consumer back to the shopping arenas uplifting demand. Currently Label printers need to deliver well, quality of a label and its ability to motivate an end customer to lift it off the shelf gives a fillip to demand. It is a difficult unprecedented happening that has occurred in our lifetime and we wonder how long it will last? It is now duty of all concerned to contribute their might in bringing back normalcy, there is of course the big condition of receiving governments promised support in time with ease and not loaded with conditions.
 Written by Harveer Sahni Chairman Weldon Celloplast Ltd. New Delhi May 2020

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