Hike in minimum wages can trigger MSME crisis: FKCCI

Bengaluru: The draft notification tabled by the Karnataka government earlier this month, revising minimum wages upwards has evidently panicked the micro, medium and small enterprises, with the Federation of Karnataka Chambers of Commerce and Industry (FKCCI) convening an urgent industry stakeholders’ meeting on Wednesday. 

Given a 60-day window for objections and suggestions on the draft bill, the federation insisted that the rise will cripple many enterprises, particularly those operating in Peenya Industrial Estate. In fact, it was argued that 20 per cent of them in Peenya will be at risk of closing down. 

At the meeting it was pointed out that Karnataka currently has the highest wages in South India, with skilled workers earning between Rs 16,000 and Rs 18,200 a month, as minimum wage. This status, it was highlighted, hurts the state’s competitive edge in labour-intensive sectors like textiles, light engineering , electronics and packaging.

“We fully support fair compensation for workers. However, the indiscriminate wage hikes, without assessing the paying capacity of small-scale industries is leading to a situation where many of them are considering shutting down. The cost of doing business in Karnataka is now significantly higher than in neighbouring states like Tamil Nadu, Telangana, and Andhra Pradesh,” stated M G Balakrishna, President, FKCCI.

The federation urged the state government to urgently introduce differentiated minimum wage slabs for MSMEs and constitute a wage rationalisation committee. It also took the opportunity to press for other reliefs such as power tariff subsidies, labour cess waivers, and working capital support.

To the central government, it recommended implementation of a uniform minimum wage ceiling across the country and announcement of wage-linked incentives or subsidies under MSME development schemes.