"The production is completely crippled since Wednesday morning. There is a production loss of around 3,000 units so far due to the protest," sources at the engine plant told PTI.
The plant produces 1,100 engines per day in three shifts for Mahindra's vehicles such as XUV 500, Bolero, Xylo, Genio and Maxximo.
Around 1,600 employees including contract workers are on "tools down" protest since Tuesday against the suspension of their leader Sunil Yadav, president of Bharatiya Kamgar Sangh, affiliated to Shiv Sena, over a fight between two workers earlier this week.
The union is demanding reinstatement of the leader.
M&M, on Wednesday had said that the company is in constant dialogue with the union for an early solution of the issue.
Workers' Union sources said that they are expecting the negotiations to resume today after the 'Gudi Padwa' holiday at the plant.
"So far, we have not yet received any communication from the management but we hope on resumption of talks," they said.
The development comes within a month of a similar agitation at the company's Nashik plant, where employees were demanding higher wages.
The Workers' Union at Nashik plant had already served a deadline of 15 April to the management to conclude the wage hike negotiations with them.