Cyclone Michaung: Chennai’s image as an industrial hub has taken a hit

Several thousand crores and counting. That’s the feared business impact of Cyclone Michaung and the destruction it has left in its wake in Chennai, India’s fourth largest city and a crucial business centre.

As the cyclone made its way to Andhra Pradesh, 45 cm of rain lashed the coastal city over a span of 36 hours on December 3 and 4, flooding streets, knocking out power, internet and telecom connectivity.

The Tamil Nadu government has sought Rs 7,033 crore as interim relief and Rs 12,659 crore as long-term flood relief from the Centre. V. Vijayakumaran, Chairman of the Chennai Auto Ancillary Industrial Infrastructure Upgradation Company—in charge of maintenance of both the North and South Phases of Ambattur Industrial Estate—estimates a tentative impact of Rs 2,000 crore because of the cyclone, though the exact loss will be known once all units resume operations.

The Ambattur-Padi industrial cluster, home to several auto component units, including firms of the erstwhile $8.5-billion TVS Group such as Lucas TVS and Sundram Fasteners, among others, suffered a forced production halt for at least two days due to heavy rains and waterlogging. Vijayakumaran says 50 per cent of the units in the South Phase were able to resume operations by December 7, when power was restored. “Another 25 per cent resumed operations by December 11, and the remaining 25 per cent are yet to recover and resume production as water has entered their units and also damaged machinery,” he says. Vijayakumaran expects things to become normal by December-end.

Meanwhile, the Oragadam-Sriperumbudur stretch—where automakers such as Renault-Nissan, Royal Enfield, Hyundai, BMW, Daimler India and Yamaha are located—faced operational disruptions after the government declared a holiday on December 4 due to bad weather. Foxconn and Pegatron, contract manufacturers for Apple, also had to pause production at their plants for at least a day due to the rains.

In north Chennai, where petrochemicals, fertiliser and power plants are located, the Chennai Petroleum Corporation Ltd is dealing with an oil spill after a leak from its premises reached the Ennore Creek. The Tamil Nadu Pollution Control Board has directed the Indian Oil Corporation subsidiary to undertake corrective steps on a war footing.

In nearby Manali, Madras Fertilizers Limited, a public sector undertaking with Rs 3,400 crore-plus in revenues, has informed the bourses that it shut its Chennai plant on December 4 and expects to resume operations in two to four weeks.

Micro, small and medium enterprises (MSME) in various industrial estates, too, have been severely impacted; they have requested extended deadlines for loan repayments and electricity dues. Per Chennai District MSME Association, 30 of the 110 units at Vichoor Industrial Estate were submerged in water after the rains.

Larger MNCs in the IT, ITeS, and Global Capability Centre (GCC) sectors fared relatively better, owing to refined business continuity plans after the 2015 floods. But widespread power outages put a dampener on work-from-home (WFH) plans. Residents faced disruptions to telephone and internet connectivity even in areas where power was restored. Chennai accounts for 10 per cent of all GCCs in India and the state contributes nearly 10 per cent to the $150-billion-plus Indian IT sector. “Poor city management during the recent rains highlighted business continuity challenges in Chennai. With no power, no internet, and no cellular service, WFH was not possible...this raises the question of Chennai’s viability as a ITeS/IT GCC [hub],” Gopal Srinivasan, Chairman & MD of private equity fund TVS Capital Funds, posted on social media. Several residents, including IT employees, had to take refuge in hotels and serviced apartments, said hotels, adding that many checked in to continue working.

Operations at key container ports—Chennai Port, Kattupalli Port, and Ennore port—were crippled, severely affecting crores of rupees of cargo movements along the east coast corridor. The Southern Railways reported a revenue loss of Rs 35 crore in the passenger segment alone as 605 trains were disrupted over four days. The Chennai airport had to shut down its runway and ground all planes from December 4 till 9 am on December 5 after floodwaters entered its premises. Indian airlines cancelled an estimated 600-plus flights over two days.

The office of Tamil Nadu Industries Minister T.R.B. Rajaa did not respond to BT’s request for a comment. As Chennai grapples with the aftermath of Cyclone Michaung, questions loom over the city’s preparedness to handle risks such as unpredictable weather patterns. Its attractiveness as an ideal investment and business destination, especially with the Global Investors Meet scheduled in Chennai in less than a month, is under scrutiny as well.

@SaysVidya