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Rediff.com  » Business » Truckers' strike hits M&M output

Truckers' strike hits M&M output

August 26, 2004 12:06 IST

India's biggest tractor and utility vehicles maker, Mahindra & Mahindra Ltd said on Wednesday that the nationwide truckers' strike has started affecting production at its automotive division.

"It has started to affect us now. We were able to stock up supplies for three days," Pawan Goenka, chief operating officer of the automotive division, which makes utility vehicles, light trucks and three-wheelers, told reporters.

Goenka said some components were still reaching the plant, but operations could not continue for more than 3-4 days if the strike was total.

As far as the supply of vehicles to the dealers' end was concerned, only Scorpio might take a hit due to the dependence on trucks. The company had stockpiled components to meet production needs of three days.

Goenka said that until yesterday, the company's four plants were receiving components.

He added that production will come to a half only if there were completely no supplies. "We have some dedicated transport companies who move in the components for us. I do not know what is the position today.  I will have to check it out," Goenka said.

Three of M&M's plants -- Nasik, Kandivelli and Igatpuri, are located in Maharashtra and the fourth plant is at Zahirabad in Andhra Pradesh.

The five-day-old truckers' strike is driving up food prices and factory costs, threatening to stoke inflation that is already at a three-and-a-half year high.

The stoppage over a service tax -- the fourth truckers' strike since 1997 -- has reduced freight flows to about a third of normal, hit diesel sales because of reduced traffic and left tens of thousands of labourers and other daily wage earners in the sector without pay.

Earlier, the Federation of All India Petroleum Traders, the apex body for fuel stations in the country, reported an 80 per cent drop in diesel sales on the highways.

"If the strike drags on, we can expect a bigger hit on industrial production and inflation as the movement of fresh produce (and other goods) will be hit," said Rajiv Malik, an economist with JP Morgan in Singapore.

Economists say if the strike goes beyond a week, the impact of inflation could be anything between 0.25 and 0.5 percentage points depending on the extent of price increases.

Goods at major ports are piling up steadily. Warehouses at the western Kandla port, the country's main commodities port, were full, one official said.

Inflation has become an increasing worry for the government since it won power in May, rising to a three-and-a-half year high of 7.96 per cent in the week ended August 7, the latest data shows.

The government last week cut a series of duties on petroleum products and steel to try to contain price growth. Delayed monsoon rains have already dampened expectations for economic growth in India.

In his 2004-05 Budget, Finance Minister P Chidambaram announced a 10 per cent service tax on freight booking agents in the latest bid to bring the largely untaxed road-transport sector under the tax net to boost revenues. Economists have said any rollback of the tax would be a bad signal from the coalition to investors over its commitment to reform.

"If the government buckles under pressure it will be a great sign of weakness and then it becomes very difficult to implement any measure," said Saumitra Chaudhuri, an economic adviser at domestic credit rating agency ICRA.
BS Corporate Bureau in New Delhi