MSMEs' body seeks immediate intervention of PM Modi on rising raw material prices

An umbrella body for micro, small and medium enterprises AICA on Wednesday sought immediate intervention of Prime Minister Narendra Modi on rising prices of raw materials such as steel, iron ore, aluminum, copper, plastics and paper.

As many as 170 industry associations have joined hands to form the All India Council of Association of MSMEs (AICA) in order to deal with issues of the sector hit hard by the pandemic.

In a representation to the prime minister, AICA said that the sector is facing huge challenges due to erosion of working capital on account of huge rise in prices of raw materials like steel, iron ore, aluminum, copper, plastics, PVC, paper, and chemicals.

"We understand this volatile situation is temporary in nature. However, it can cause permanent damage to the MSME sector. In spite of a drop in demand due to lockdown, prices are on the upswing, particularly steel, pig iron and other raw materials, too," it said.

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It claimed that steel and other base material manufacturers are declaring 10-20 times higher profit whereas all the MSMEs are on the verge of extinction.

The association has suggested eight points to overcome the crisis and it includes protection against escalation in prices for some period; public sector enterprises must be instructed to accept cancellation of orders from MSMEs with no penalty/ black listing; a formula should be derived for price escalation; and quota for MSMEs at concessional price.

It said that the government should allow import of all steel materials based on cost and quality requirements at zero import duty and no anti-dumping; and banning the export of iron ore and steel products.

It also recommended that MSMEs, under government contract and suppliers to PSU, should be allowed to revise their price with fresh quote and for all finalised government and PSU supplies, they should be permitted to invoke escalation clause and requote.

"If the MSMEs get crippled and choked this way, due to spiraling price rise of raw materials, it will only discourage entrepreneurship, ultimately leading to failure of the government's objective of Atmanirbhar Bharat.

"We, therefore, urge the government to take concrete steps to reign in raw material prices," it said.

The core team members include Coimbatore District Small Industries Association President M V Ramesh Babu, Arise Chairman Yogesh Pawar, Southern India Engineering Manufacturers' Association President K V Karthik, and Ludhiana Hand Tools Association President S C Ralhan.

MSMEs account for 30 per cent of India's GDP, 45 per cent of manufacturing output, 48 per cent of total exports, and employ over 11 crore people. There are about 63.5 million MSMEs in the country.