As the new month sets in, companies which employ casual labour or pay their employees in cash are feeling the heat of the government’s demonetisation drive. This is India’s first payday since the old Rs 500 and Rs 1,000 currency notes were withdrawn from circulation three weeks ago on 8 November.
Manufacturing units in Mumbai’s Thane industrial area have been hard-pressed to pay salaries on time as owners complain that they are unable to withdraw enough cash from the bank. Thane is the third most industrialised area in Maharashtra with more than 15,000 small and large enterprises. Almost all employers in the area said they have had to realign their salary cycles or find innovative ways to remunerate workers.
Take the case of Raghuram Pal, a turner at a manufacturing unit in Bombay, whose employer has resorted to paying his workers through cheques in the aftermath of the demonetisation. Pal, however, does not have a bank account which means that his salary had to be clubbed with a colleague’s.
We get daily wage in cash but this time they started paying us through cheques due to the cash shortage. I am not sure how long this will continue. He (my colleague) has to queue up outside the bank for me whenever we run out of cash. After standing in a queue for hours, we only get Rs 2,000 at a time.Raghuram Pal, Worker
Pal’s colleague Uttam Chand Sharma, who is a turner at the same unit, said that he has been standing in queue for at least 45 minutes each time he has to withdraw cash from the bank.
We only get Rs 2,000 at a time and that lasts only for 2-3 days. This is not enough for our weekly expenses so we have to make multiple trips to the bank. The Rs 2,000 note is not accepted anywhere outside so we have to think about arranging for change before going out to withdraw.Uttam Chand Sharma
Old Notes Make A Comeback
In another unit a few hundred metres away, employees of Westin Corporation work on iron sheets to recast them. Sachin Potphode, who is a grinder at the company, said he received his salary in old currency notes and has been queuing up outside the bank to exchange them.
I got my salary, Rs 6,500 worth of dues, on 10 November and it was all in old currency so I wasted two days just standing in queues outside the bank. When I finally got in, I got a Rs 2,000 note in return which is also useless because nobody provides change for it easily. Shopkeepers ask us to buy in bigger quantities but we can’t afford that.
Ramu, a daily wage labourer who works at construction sites, said he has on occasions been offered old Rs 500 notes by some employers, which he refused to accept. But the lack of cash meant he has had to spend some nights on an empty stomach.
Even the ration shops aren’t accepting old notes these days. I slept hungry on multiple nights. I am not accepting Rs 500 notes from employers any more but some people are exchanging them at nearby grocery stores for Rs 400 or Rs 300.
Employers Queue Up
While workers are struggling to find ways to deal with the cash crunch – often asking others to stand in queues on their behalf, or spending as little as possible – employers are hardly better off.
The owner of a plastic manufacturing company in the area, which has a turnover of more than Rs 10 crore, said he broadly supports the government’s move but has no idea how his business will benefit from it in the long term.
The owner, who refused to be identified, said he has had to delay salaries, and find ways to get rid of old currency notes. He’s ready to pay salaries out of his own pocket but the daily withdrawal limit has left him with barely enough cash to do that. He has also tried to pay salaries in cheques, he said, but many of his workers do not have bank accounts. To add to his worries, he expects business to be slow for at least the next quarter or so.
Rajesh Udyavar, proprietor of Shree Engineering at Thane’s Wagle Estate area has found a temporary solution. He’s paying salaries fortnightly instead of on a monthly basis.
We are facing a temporary cash flow problem. We paid salaries in two parts this time. From now on, we will start paying in cheques. Banks are not giving us enough money. In one visit, I get a maximum of Rs 10,000 which is not enough to pay salaries. The next month will be even more difficult.Rajesh Udyavar, Proprietor, Shree Engineering
Udyavar expects his employees to endure a little hardship, given the circumstances, but people working at the factory weren’t too delighted.
Irregular Instalments
Jayanti Lal, a fabrication fitter at the unit, said he received his salary in two instalments this time around. He added that there’s uncertainty about salary structure in the future because no one knows when the cash situation will be resolved.
“We are getting the money we need but it’s not coming to us in one go, like it should. Nobody knows when that situation will ease,” Lal said.
Meanwhile, a manufacturing unit owner, Shekhar Mugge, who employs minimum wage workers, said that he has been able to get enough currency notes from the bank to pay salaries. But on occasions he has received bundles of Rs 10 and Rs 20 notes as well and had little choice but to pay salaries using those.
We are getting all kinds of notes from the banks. There’s a big shortage of Rs 500 and Rs 2,000 notes but all other notes are available. There is some pain in the system but not excessively.Shekhar Mugge
Mugge too had to pay his workers in instalments since business has been affected, at least for the time being.
“We paid salaries bit by bit to workers and split them wherever possible. We paid as and when we could withdraw money. Our work has been impacted too but I hope it’s just temporary,” Mugge said.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)