India’s COVID-19 Lockdown Extended: We Answer FAQs on the Latest Guidelines

Posted by Written by Nishtha Yadav Reading Time: 5 minutes
  • India’s COVID-19 lockdown extended to May 3, select economic activities like partial resumption of manufacturing operations to resume April 20.
  • Government has identified hotspot and non-hotspot districts across the country, and divided them into three zones – red, orange, and green. Economic activities are only allowed under the green zone. Districts under green zones are the ones where no positive COVID-19 cases have been reported in the last 28 days.
  • The labor ministry may also issue guidelines to factories and industrial establishments on standard operating procedures (SOPs) for workers that will resume work from April 20.

India’s 21-day nationwide lockdown was set to end April 14, but has been extended to May 3, 2020 due to the rising number of COVID-19 cases in India.

However, given the deep economic impact of the COVID-19 pandemic, the Ministry of Home Affairs (MHA) issued guidelines to allow certain economic activities, including partial resumption of operations for manufacturing units and industrial establishments, starting April 20, 2020.

Who can resume economic activities?

Restrictions will be lifted for factories, manufacturing units, and industries operating in rural areas and areas outside the city and municipal limits.

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Also, companies and units located in access-controlled special economic zones (SEZs), export oriented units (EOUs), and industrial townships will also be allowed to resume work from April 20. These establishments need to follow strict social distancing norms, and the workers must be provided with transportation and accommodation within the township.

But certain activities could also commence in the green zones identified by the government.

Demarcation of zones based on hotspots

India’s health ministry has identified hotspot and non-hotspot districts across the country, and further divided them into three zones – red, orange, and green.

Red zone: Under the red zone, 170 hotspots have been identified as these districts have reported a large number of COVID-19 infections and high growth rate of the virus has been recorded. No economic activities will be undertaken in these zones.

Orange zone: These zones have had only a limited number of COVID-19 cases with no surge in positive cases. A hotspot district (red zone) can be converted into an orange zone if no positive cases are reported for 14 days.

Green zone: These zones are areas where no positive cases have been reported in the last 28 days. From April 20, activities allowed by the home ministry can begin in these zones, subject to permission from the state government or district administration.

What activities are allowed under the latest guidelines?

The following activities will be allowed to resume from April 20, 2020.

Please note that most of the activities are only permitted in rural areas and outside city and municipal limits, SEZs or EOUs – provided they do not fall under the red zones, or in green zones pending permission from the state or district administration.

  • Food processing units;
  • All activities related to agriculture, horticulture, and fisheries;
  • Manufacturing of essentials like drugs, medical supplies and equipment;
  • Manufacturing units and industrial establishments, including micro, small, and medium enterprises (MSMEs), producing essential goods;
  • IT and hardware manufacturing;
  • Packaging material manufacturing;
  • Coals, mines, and mineral production;
  • Oil and gas refineries;
  • Road construction and irrigation projects;
  • Jute industries; and
  • Courier services.

Restrictions will also be lifted on construction of renewable energy projects, construction firms, and real estate companies. However, they can resume operations only if workers are available on-site, and are not being outsourced from another city.

However, e-commerce firms will only be able to deliver essential commodities across the country. Earlier, the government had allowed delivery of non-essential items as well, but then revised its guidelines to prohibit supply of non-essential goods during the lockdown. Therefore, consumers will not be able to buy items such as mobile phones, clothes, refrigerators, and air conditioners, among others till the lockdown ends on May 3.

As per a latest notification issued by the home ministry, non-banking finance corporations (NBFCs) including housing finance companies, and micro-finance institutions can resume services. Bamboo, coconut, cocoa, spices plantation and their harvesting, processing, packaging, sales and marketing are also allowed to be carried out starting from April 20.

Has the labor ministry issued advice to establishments allowed to reopen?

As per media reports, the labor ministry may soon issue directives to factories and industrial establishments explaining the standard operating procedures (SOPs) for workers who will be allowed to resume work starting April 20.

Further, the ministry will undertake random checks at these establishments to ensure that companies are in compliances with the guidelines, and that strict social distancing is being maintained during work.

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The media report quoted government sources and said the “directives will focus on ensuring return of young workers staying in the vicinity of the establishments.”

However, companies are concerned about expected labor shortages as thousands of workers fled to their hometowns when the nationwide lockdown was first announced on March 25, 2020. As per a Bloomberg Quint report, companies are already reporting labor shortages at ports and factories, including auto and auto parts manufacturers. However, the impact of labor shortages will be measured only when industrial establishments resume operations next week.

What are immediate concerns reported by Indian businesses?

Some concerns and confusion still persist after the guidelines were announced early this week.

For instance, it will be difficult for car manufacturers to resume operations if one of their auto components factory cannot open, either due to its presence in a red zone or disruption in the local supply chain or any other factor, such as labor shortage.

Another issue pointed out by large corporates is providing accommodation to thousands of workers – they are pushing for tweaks in the guidelines for the same.

Volkswagen Group India’s Managing Director Gurpratap Boparai was quoted in a media report saying, “For large factories like us, and the fact that most of these areas don’t have much residential accommodation, it’s impractical to house workers on the factory premise.”

The shortage of laborers will continue to hinder operations – while movement of vehicles carrying essential and non-essentials have been permitted, it can be a struggle finding laborers to help with loading and unloading of goods.

Meanwhile, local vendors and traders are unsure if they are permitted to resume work from April 20, and are seeking more clarity on movement of goods, obtaining raw materials, and sourcing from local supply chain.

Is government working on incentives to ease financial distress on businesses?

Last month, the government announced temporary financial and tax relief for businesses and individuals in order to mitigate the impact of the pandemic on the economy. The finance ministry is expected to follow that up with a stimulus package to address immediate concerns of the corporate sector and small businesses.

To provide additional liquidity, the government is likely to provide income tax and goods and services tax (GST) refunds to large companies.

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Currently, the government is issuing refunds to MSMEs and small taxpayers and is expected to grant around INR 180 billion (US$2.36 billion) in tax refunds. Once this process is over, the government will move on to granting refunds to large companies.

Some of the measures that can be expected from the stimulus include additional support to the poor via cash transfers, bank loans for MSMEs to meet wage costs, clearing dues of certain businesses, and increased infrastructure spending, among others. Further, industry bodies say that the economic package should include support for large companies as they constantly work with smaller businesses and buy goods and use their services.

(The article was originally published on April 17, 2020 and was updated on April 21, 2020 to include the latest developments.)

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for business support in India.