MSMEs unable to fulfill orders on rise of raw material prices
   Date :26-Apr-2022
Business Bureau
A steep increase in raw material prices in the last few months has threatened the survival of micro, small and medium enterprises (MSMEs) in the manufacturing sector. During unprecedented situations the Government should announce bold measures to contain the rising raw material prices in the country. Currently, the MSME vendor are facing a sudden escalation of raw material prices like steel, iron ore, aluminum, copper, plastics, PVC, paper and chemicals, required by industry, said sources.
The MSME vendors had taken different orders from various State and Central Government public sector units (PSUs) for supplying various finished goods in varied sectors. Under ‘Make In India’ initiative of the Government, a large number of MSME vendors had applied for tenders and hence they were allotted orders. At the time of allotment of orders, mainly comprising of steel and other consumable products the prices were normal as steel was being quoted at Rs 50 per kg to Rs 55 per kg. But due to foreseen circumstances, all of sudden the steel prices have soared to Rs 80 per kg to Rs 85 per kg, which is abrupt and on the higher side. In the same manner other consumable prices have also shot up by 35 per cent to 40 per cent, sources in the industry said.
With sudden rise in raw material prices MSME vendors are facing major problems in supplying their materials to all Government organisations.
Under such uncontrolled conditions, how can MSME entrepreneurs survive without Ministry of MSME support. It would be difficult and unviable for small individual manufacturers to supply the tendered finished products.
It is suggested that the MSME Ministry should intervene in such important issues of MSME vendors so that entrepreneurs get revised rates from the respective PSUs. The MSME vendors are currently not in a position to complete their orders due rise of 35 per cent to 40 per cent hike in raw materials prices. The MSMEs faced with working capital erosion because of the high cost of inputs. While the units supplying to public sector undertakings (PSUs) are unable to get a revision in prices of their products, the open market was unable to take the full impact of high raw material prices. In spite of a drop in demand due to lockdown, prices are on the upswing, particularly steel, pig iron and other raw materials, sources added.
Sources suggested that the Government should set up a mechanism to ensure raw material price stability for MSMEs. The PSUs should allow MSMEs to cancel orders without imposing a penalty and permit them to quote revised prices. The Government should also allow import of all steel materials based on cost and quality requirements at nil duty and ban export of iron ore and steel products. The high raw material prices have threaten the survival of MSMEs,
sources further said.