MSMEs around Chennai see damages of over Rs 3,000 cr & counting

Michaung Effect

The full import of the destruction cyclone Michaung has wrecked on the industrial belt in and around Chennai is yet to be assessed. But back-of-the-napkin estimations emerging from some of the worse off industrial estates puts the figure upwards of Rs 3,000 crore. The Tamil Nadu government, however, chooses to peg this at just Rs 967 crore.

While the math is still in the works, what is apparent is that the impact was felt more by the micro, small and medium enterprises that operate out of industrial estates run by the state government’s Small Industries Development Corporation (SIDCO), where evidently the infrastructure was not equipped to handle the deluge. 

This starkly contrasted with the industrial parks run by the government’s other arm -  State Industries Promotion Corporation of Tamil Nadu (SIPCOT) - where the larger industries with far deeper pockets are located. While these big OEMs could swing back into operations on Wednesday, December 6, hundreds of smaller units could not be accessed until Saturday, December 9.

Majority of the 2,100-odd units in Vichur, Ambattur (north phase), Perungudi, Thirumazhisai, Thirumudivakkam, and Villivakkam industrial estates were flooded days after the storm receded with water reaching their shop floor, damaging machines, finished goods, and raw materials.

The state government says, in all, 4,800 MSME units in 24 industrial estates in Chennai, Tiruvallur, Kanchipuram, and Chengalpattu districts have been affected due to excessive rains and subsequent floods.

The figure of over Rs 3,000 crore was reported by just the six worst-affected industrial estates run by SIDCO, when DH spoke to their association representatives. 

They said the number could go up due to two factors. Several owners are yet to arrive at a figure as they continue to assess the damages to their units and the numbers yet to be presented by the hundreds of MSMEs that function from private lands close to the estates, that were swamped just as badly.

While the north phase of the Ambattur Estate is staring at a loss of Rs 2,000 crore, the figure is Rs 400 crore in Perungudi, about Rs 100 crore each in Thirumudivakkam and Thirumazhisai, and Rs 160 crore in Vichur. The association representative in Villivakkam said owners are yet to come up with the amount of damage to their factories and the estimate of losses. 

The losses would go up further if one computes the manufacturing loss, as several units will take at least a couple of weeks to restart operations.  “We are classified as a Red Zone estate because we deal with heat treatment, paint, and chemicals. Resuming operations at our estate will take at least another two weeks because we need to drain the water completely and then start the recovery process,” Abdul Shafique, President, Vichur Industrial Estate Manufacturers Association, said. 

The affected MSMEs supply components and other materials to sectors like automobiles, electronics, and chemical manufacturing and medical devices. 

K Mariappan, President, Tamil Nadu Small and Tiny Industries Association, said owners of these units are still checking the extent of the damage to the machine, and assessing whether it can be repaired, or it should be replaced. 

G Aravind, President, Ambattur Industrial Estate Manufacturer’s Association, said several unit owners have not been able to arrive at the extent of the losses due to a slew of factors including the shortage of surveyors from insurance agencies.

“Several people are yet to get back to us on the degree of damage to their machinery. People don’t want to take chances by switching on the machines before it is surveyed by insurance companies,” he told DH.

On the government’s conservative number a senior official said, “This is only a tentative figure, and the number could go up as we are yet to receive estimates from some MSME units.”  He added that the government would have lost about Rs 100 crore due to damages to roads and other infrastructure in the SIDCO estates. 

Tamil Nadu MSME minister T M Anbarasan told DH that the government will meet representatives from insurance companies this week to ask them to speed up the process of assessing the losses and evaluating the claims without any delay. 

“We will ask the insurance companies to help the MSMEs in resuming work soon. We are also asking banks to provide additional overdraft facilities and working capital loans to MSMEs. From our side, we are working towards repairing damaged roads and other infrastructure in the estates,” he said. 

However, the entrepreneurs expect more than the persuasion of insurance companies, from the government. “The state government should provide a minimum of Rs 25,000 and Rs 2 lakh to micro and small enterprises as a one-time relief measure to offset the losses. Also, MSMEs should be included in the list of beneficiaries under the National Disaster Management Fund to get relief when they are affected by natural disasters,” Mariappan insisted.

Credit: DH Photo

Insurance claims have only just begun

Insurance claims started trickling in soon after cyclone Michaung had run its course. Needless to say that motor vehicles’ claims were quicker in the aftermath. It’s still early days and most insurers shied away from speculating on numbers or dwelling on inflows just yet.  On Friday the Tamil Nadu Finance Minister held a meeting with the motor insurers  where claims of 2320 vehicles (1275 four-wheelers 600 two-wheelers and 445 commercial vehicles) were discussed. “We have received over 350 motor insurance claim intimations from Chennai alone in the last 5-6 days as compared to 5-10 claims being reported directly on a daily basis on regular days of business” Nitin Kumar Head - Motor Insurance Policybazaar told DH. 

The queries are largely related to partially or fully submerged cars and internal damages, Kumar said, adding that there is a 5X increase in demand for add-ons including engine protection in areas that are flood-prone as compared to other parts of the country. “During such scenarios, we see a major uptick in the demand for add-ons, especially engine protectors. Flood-related damages can cost a vehicle owner 3-4 times more money in comparison to an average accident-related expense, and for someone without insurance and essential add-ons takes the brunt of the heavy expense in the difficult times,” he explained.

Not revealing the exact number of claims seen in the past week Sajja Praveen Chowdary business head for Policybazaar underscored a 5-10% increase in fresh enquiries for MSME and home insurances. At HDFC ERGO General Insurance the motor insurance claims numbered 240 while about 75 commercial insurance claims were made according to its  president for retail business Parthanil Ghosh.

“Property insurance - covering multiple types of coverages including goods machinery raw material godowns etc - and SME insurance penetration is generallylow in the country” Chowdary pointed out.

(With inputs from Lavpreet Kaur)