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

The feared business impact of Cyclone Michaung and the devastation it has caused in Chennai, India’s fourth-largest city and a vital business hub, amounts to several thousand crores and continues to escalate.

As the cyclone advanced towards Andhra Pradesh, Chennai experienced torrential rainfall, with 45 cm recorded over 36 hours on December 3 and 4. This deluge flooded streets and resulted in power outages, disrupting internet and telecom connectivity.

The Tamil Nadu government has requested Rs 7,033 crore as interim relief and Rs 12,659 crore as long-term flood assistance from the Centre. V. Vijayakumaran, Chairman of the Chennai Auto Ancillary Industrial Infrastructure Upgradation Company, responsible for maintaining both the North and South Phases of Ambattur Industrial Estate, estimates a preliminary impact of Rs 2,000 crore due to the cyclone. However, the exact extent of the loss will only be determined once all units resume operations.

The Ambattur-Padi industrial cluster, housing numerous auto component units, including those from the former $8.5-billion TVS Group such as Lucas TVS and Sundram Fasteners, faced a production halt of at least two days due to heavy rains and waterlogging. According to Vijayakumaran, 50 percent of the units in the South Phase managed to resume operations by December 7 after power was restored. “Another 25 percent resumed operations by December 11, and the remaining 25 percent are still struggling to recover and resume production as water has entered their units, damaging machinery,” he explains. Vijayakumaran anticipates a return to normalcy by the end of December.

In the Oragadam-Sriperumbudur area, home to major automakers like Renault-Nissan, Royal Enfield, Hyundai, BMW, Daimler India, and Yamaha, operations faced disruptions following a government-declared holiday on December 4 due to adverse weather conditions. Additionally, contract manufacturers for Apple, Foxconn, and Pegatron, had to halt production at their facilities for at least a day due to the heavy rainfall.

In northern Chennai, where petrochemicals, fertilizer, and power plants are situated, the Chennai Petroleum Corporation Ltd is grappling with an oil spill following a leakage from its premises that reached the Ennore Creek. The Tamil Nadu Pollution Control Board has instructed the Indian Oil Corporation subsidiary to take urgent corrective measures.

Meanwhile, in the vicinity of Manali, Madras Fertilizers Limited, a public sector enterprise generating revenues exceeding Rs 3,400 crore, announced the closure of its Chennai plant on December 4. It anticipates resuming operations within two to four weeks.

Micro, small, and medium enterprises (MSMEs) across various industrial estates have faced significant setbacks, prompting requests for extended deadlines for loan repayments and electricity dues. According to the Chennai District MSME Association, 30 out of 110 units at Vichoor Industrial Estate were inundated with water following the heavy rainfall.

On the other hand, larger multinational corporations (MNCs) in the IT, ITeS, and Global Capability Centre (GCC) sectors have weathered the storm relatively well, thanks to improved business continuity plans established after the 2015 floods. However, widespread power failures hindered work-from-home (WFH) arrangements. Residents experienced disruptions in telephone and internet services, even in areas where power had been restored. Chennai hosts approximately 10 percent of all GCCs in India, with the state contributing nearly 10 percent to the over $150 billion Indian IT sector.

“Poor city management during the recent rains highlighted business continuity challenges in Chennai. With no power, internet, or cellular service, WFH was not feasible… this raises concerns about Chennai’s viability as an ITeS/IT GCC hub,” remarked Gopal Srinivasan, Chairman & MD of private equity fund TVS Capital Funds, on social media. Many residents, including IT professionals, sought refuge in hotels and serviced apartments, with some checking in to continue their work.

Operations at crucial container ports such as Chennai Port, Kattupalli Port, and Ennore Port came to a standstill, severely impacting cargo movements worth crores of rupees along the east coast corridor. The Southern Railways reported a revenue loss of Rs 35 crore solely in the passenger segment, with 605 trains disrupted over a span of four days. The Chennai airport had to cease its operations and ground all planes from December 4 until 9 am on December 5 due to floodwaters inundating its premises. Indian airlines cancelled over 600 flights during this period.

Despite repeated attempts, the office of Tamil Nadu Industries Minister T.R.B. Rajaa remained unavailable for comment on the situation. As Chennai contends with the aftermath of Cyclone Michaung, concerns arise regarding the city’s readiness to manage risks associated with unpredictable weather patterns. Additionally, its appeal as a prime investment and business destination, particularly with the Global Investors Meet scheduled in Chennai in less than a month, is now subject to scrutiny.