Chennai: Cost cutting in companies alternating layoffs

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Chennai, Nov 4: The US financial meltdown as told by Manmohan Singh might not have affected India to a large extent. Indian companies consider 'pink slips' as the last option with an economic downturn. Firms that cannot pare their payroll must look for other ways to cut costs from travel to telephone bills, power to infrastructure purchases, non-essential expenditure face the axe.
"Most travel has been replaced by video-conferencing," says a senior executive from a major retail firm. Others go one step further. "We have told all our customers that we intend to use Skype rather than telephone for overseas calls," says Manikam Ramaswami, chairman and managing director of Loyal Textiles and State chairman of the Confederation of Indian Industry.

The textile sector, also hit hard by the power crisis in the State, is also being forced to ruthlessly cut travel costs, even in an industry dependent on the global market. "Even when the government pays for stall space in exhibitions, companies think twice because of the airfare," he says, pointing out that hardly any exporters took up the invitation of an American cotton conference, with most also bypassing a recent exhibition, even though it was held in nearby Sri Lanka. "Who will pay for the hotel bills?" he asked.

Company guesthouses are getting more use as firms avoid five-star hotels. Such caution on the part of corporates is taking its toll on the hospitality sector as well. There has been a 21 per cent slowdown on the buoyancy factor, which is the timespan of over 90 per cent occupancy levels, says M P Purushothaman, President of South India Hotels and Restaurants Association. Companies are also directly negotiating with hotels on tariffs, bringing down the average room rent from Rs 8,000 per day to Rs 6,000.

Especially in Tamil Nadu, power is another anxiety. Corporates are reducing air-conditioning costs as far as possible, with retailers switching to natural breeze except during rush hour. In IT companies, power-sucking equipment is being used more sparingly.

"Servers that used to run 24 hours are being switched off frequently," says N. Sairam, a supplier of electronic equipment. Equipment investment is also being delayed. "Instead of purchasing, companies now prefer to go for rentals," he says. So far as purchases are concerned, "companies keep asking for quotes, but closure is minimal. Before this, they would decide in a week or two," he says, adding that this is the case with mid-size players, rather than the large ones.

A new trend is companies such as HP and IBM providing the finance to buyers. "Principals are providing schemes in which equipment can be bought in instalments," he says. Online hiring is also proving to be cost-effective. "Internet is faster and allows for just-in-time hiring," V Suresh, Senior Vice-President at, a leading job search website.

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