Fractured/Earth

The mood is tense in Malur Industrial Area. About 45 kilometres to the east of Bengaluru, it has a melange of small and medium industrial units. Walking through it, you will see firms making diverse products — laboratory glassware, farm equipment, steel products and plastics. The road leading into the industrial area adds yet more diversity — car batteries, hydraulic pumps, steel scrap.

Even as India worries about shortages of cooking gas, industries are starting to worry about something else — the raw materials that come from petroleum. Two weeks have passed since the US and Israel attacked Iran. In the days since, between Iran blocking the Strait of Hormuz and exporters like Qatar Petroleum shutting down oil and gas exports, an unprecedented energy shock has begun to ripple across the world. India, which gets 80-85% of its LPG; about 55% of its crude; and 60% of its LNG from the Persian Gulf, is amongst the worst affected.

Even in this cluster in Bengaluru, where four of the seven firms CarbonCopy spoke to run on electricity, apprehension is rising. “We run on electricity and, as of now, there are no issues with power supply,” said Naveen Paul D’Cunha, the director of Akshay Enterprises, a sheet metal fabricator.

But he is starting to get worried. “If oil prices go up, so will paint prices,” he told CarbonCopy. “Until $110, paint prices might not be affected too much. But if it goes higher, the cost of paint will go up.” If that happens, firms like his will have to take those costs onto their margins — or pass them to customers, potentially losing sales. “Crude is not used for only petrol and diesel. It is also used for many industrial inputs as well — chemicals, sulphur, paint, plastics, etc. all those will be affected.”

By the end of the first week of the conflict, once the Indian government decided to divert LPG supplies from commercial users to households, India saw rising concerns amongst eateries over commercial LPG supplies. Since then, as CarbonCopy found while reporting from Bangalore, Kolkata, Delhi and Jaipur, those fears have begun spreading to other sectors as well.

Read the whole report here: https://www.carboncopy.info/west-asia-shock-ripples-through-india-s-kitchens-factories-and-supply-chains.
Two things that strike me. First, as the report says, “In 2016, (India’s MSMEs) were hit by demonetisation — a shock which saw units eat into their working capital while waiting for demand to revive. They got back to their feet only to be hit by India’s GST rollout in 2017.  With that, smaller units ceded business to larger rivals. Then in 2020 came Covid-19 — and two years of lockdowns and further demand destruction…. Now, with the energy shock, MSMEs are in trouble again.” And that is after just two weeks of the conflict. One wonders what lies ahead.
And second, I cannot help thinking of the (relatively) widespread reporting we saw at the time of demonetisation, at the time of GST, at the time of Covid right now. Compared to each of those, ground reporting on the energy shock is very thin. Newsrooms are either yet to grasp what an energy shock can mean — or Indian journalism is now too enfeebled, too beaten down to make the effort. Wonder which.