Sharp increase in raw material prices hit MSME units hard

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The MSME units in the foundry and engineering space are in a fix, caught between abnormal increases in the price of raw materials on the one hand and order enquiries coupled with labour shortage on the other.

“The last three months have been terrible. The situation is worsening by the day; we are unable to schedule production,” say unit owners, urging immediate government intervention to bail them out of their present imbroglio.

“Both the Centre and State should step in without further delay. If the situation persists for another month or so, we will have to shut operations,” said K V Karthik, Managing Director, Deccan Industries and president, the Southern India Engineering Manufacturers’ Association (SIEMA).

Representatives of 10 industry associations such as Codissia, Indian Chamber of Commerce and Industry, Coimbatore, CII (Coimbatore zone), Institute of Indian Foundrymen (Coimbatore Chapter), SIEMA, Coimbatore Industrial Infrastructure Association (COINDIA), TN Pumps and Spares Manufacturers’ Association, Laghu Udyog Bharati, Coimbatore Tirupur District Micro and Cottage Entrepreneurs Association and Kovai Power Driven Pumps and Spares Manufacturers Association – under the Joint Council of Associations of Coimbatore (JCAC) umbrella met to highlight the plight of the MSMEs in this region.

Codissia president Ramesh Babu pointed out that the industries were slowly returning back to normalcy in the unlock phase, when the prices of steel and other allied foundry items like coke, pig iron, cast iron, steel scrap, CI borings, HR Sheet, CR Sheet, copper, brass, aluminium, amine gas and PVC shot up by 30 – 40 per cent.

There is acute shortage of materials like electrical steel, PVC resin, iron ore and steel scrap, providing an opportunity for the middlemen to hoard such materials.

MSMEs are facing severe cash crunch and erosion in working capital, he said suggesting the need for reducing import duty and allowing import of steel materials to India, while considering to ban export of iron ore and steel materials.

The government should look at fixing the MRP price as the selling rate for raw materials, said JCAC representatives, adding “we have sought appointment with the Steel Ministry to put forth our issues. It’s a historical increase, not seen in the last 6-7 years.”

The JCAC, while reiterating its demand for reopening the SAIL yard in Coimbatore said that the MSMEs were forced to rely on private operators and traders for supply of raw materials, making them uncompetitive in the market. “Reopening of the SAIL yard would help tide over the crisis of shortage of raw materials,” said SIEMA president, suggesting the need to reintroduce the system of allocation of raw materials to MSMEs at subsidised prices as in earlier times via SAIL, VIZAG, NSIC, SIDCO and other nodal state government distribution systems.



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