Spiralling rise in prices of raw materials will only discourage entrepreneurship, says association
Industry associations representing MSME sector in the region look for a positive response from the Central government following deliberations conducted by All India Council of Association of MSMEs on Wednesday on problems faced by industries, with particular reference to rapid escalation in the cost of steel and other construction inputs.
The AICA, representing around 170 MSME associations covering approximately more than two lakh industrial units across the country, made a representation to the Central government seeking immediate intervention for sustenance of the sector, and has forwarded copies of the same to Union Ministers of Finance and Corporate Affairs, MSME, Steel, Commerce and Industry, and Coal and Mines.
Representatives of Tiruchi District Tiny and Small Scale Industries’ Association, Nagapattinam District Small and Tiny Industries’ Association, Tiruvarur District Small and Tiny Industries’ Association, BHEL Small Industries’ Association, and Valavandankottai Industrial Manufacturers’ Association took part in the discussion and sought speedy solutions for survival of the MSME sector, in the backdrop of many industries turning sick.
The escalation in the cost of steel during the lockdown period to the extent of 60% to 70% was unprecedented, threatening the very sustainability of manufacturing units, R. Ilango, president of Tiruchi District Tiny and Small Scale Industries’ Association, said.
BHELSIA has, through a forum for raw materials, conveyed the difficulties being faced by the fabrication sector, BHELSIA president Rajappa Rajkumar said.
According to V. Ramachandiran, president of Nagapattinam District, Small and Tiny Industries’ Association, the reluctance of banks to implement interest subvention scheme of Reserve Bank of India was deplorable.
In its representation to the Prime Minister, AICA has pointed out that the steep hike in the price of raw materials across all sectors, despite low consumption and subsequent drop in production by MSMEs has led to loss of employment and depreciation in the value of rupee.
“It is obvious that there is a cartel created by steel manufacturers, which include private and public sector undertakings. Steel is an an essential commodity for overall development of the country and exports should be as per availability of surplus. Steel and other base material manufacturers are declaring 10 to 20 times higher profit whereas all the MSMEs are on the verge of extinction. This clearly shows that the corporate and PSU commodity companies are profiting at the expense of MSMEs,” the AICA said.
It has questioned the fixation of benchmark for steel industry pricing based on international market prices rather than the demand and supply situation in the country.
Due to the prevailing situation, the MSMEs are unable to execute orders taken at a much-lower price, and face the uncertainty of getting black-listed by PSUs and large corporates if they do not honour contracts.
The possible solutions suggested by AICA include protection against escalation for some period, prevailing upon PSUs to accept cancellation of orders, derivation of formula for price escalation, revisit of all orders of PSUs to MSMEs, directing PSUs to accept fresh quote, GST-based funding and allowing import based on cost and quality.
Seeking an appointment with Prime Minister Narendra Modi to highlight the precarious situation of MSMEs, AICA cautioned that the spiralling rise in prices of raw materials will only discourage entrepreneurship and failure of the government’s objective of Atmanirbhar Bharat.
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