Rise in raw material price hits struggling MSMEs hard

Paralysed throughout the pandemic, the Micro, Small and Medium Enterprises (MSME) sector in Tamil Nadu is going through a brand new problem — the rising raw material prices.

Several MSME unit house owners have mentioned that those that place orders usually are not prepared to shell out extra and need the consignments at pre-pandemic charges. For occasion, one of many models in Coimbatore had provided equipment to a textile unit final 12 months. It acquired a repeat order, not too long ago, on the similar price. When the MSME unit proprietor requested for a price revision, the textile unit was not prepared to pay the next quantity.

“With the steep hike in raw material prices, how will MSME units supply machinery or components at the earlier prices? This is a difficult situation,” mentioned M.V. Ramesh Babu, president, Coimbatore District Small Industries’ Association.

“Those who get government orders take three to six months to execute them. If they are unable to honour the commitment, they face the risk of being black-listed. But the units will suffer a loss if they execute the orders at the agreed price,” he famous.

According to numerous commerce associations, in the final 5 months, the price of stainless-steel elevated by 32%, to ₹200 a kg, aluminium by 26%, to ₹210 a kg, and pure rubber by 52%, to ₹156 a kg. Copper, a key part for a lot of in the MSME sector, has touched ₹600 a kg, a rise of practically 77%.

R.G. Chakrapani, secretary, Thirumazhisai Industrial Estate, mentioned there was a scarcity of raw material.

Though the costs of sure raw supplies have gone up, industries giving orders usually are not in a position to match the costs, mentioned K. Baskaran, secretary of the Kakkalur Industrial Estate Manufacturers’ Association. “We are forced to shrink our margins to stay afloat,” he mentioned.

While many MSMEs argue that growing the product price won’t assist, pumpset and moist grinder manufacturing industries in the Coimbatore area have already revised the product price. “We [pump manufacturers] went in for a 5% revision last month. However, to survive, pump manufacturers will have to increase the end product price by at least 10%,” mentioned K.V. Karthik, president of the Southern India Engineering Manufacturers’ Association.

“The price of electrical steel, the main raw material used by pump makers, was increased by ₹12,000 a tonne on Saturday. If there are such huge spikes in raw material prices, units will slow down or even stop production,” he rued.

K.E. Raghunathan, convener of the Consortium of Indian Associations, defined that corporations won’t be able meet their overhead prices, which is able to end result in defaults and non-payment of advantages and salaries to workers.

“Consumers will have to bear the higher price, if passed on, and that will shrink the demand further. Both situations are dangerous now,” he mentioned.

R. Selvam, secretary of the Thirumudivakkam Industrial Estate Manufacturers’ Association, wished the federal government to assist by forming separate MSME clusters or a special-purpose car to consolidate necessities and negotiate with raw material suppliers for higher pricing.

He additionally wished the federal government to scale back import responsibility, and, instantly, ban the export of sure commodities, primarily based on inland demand.