Steep hike in raw material prices in October and November is a blow to Micro, Small and Medium-Scale Enterprises (MSMEs) in the engineering sector here, say industry owners.
The MSMEs resumed operations in May after relaxations were announced in the nationwide lockdown that came into effect in March to control the spread of COVID-19. However, till August the industries were unable to run at higher capacities because of low volume of orders. It was only in September that manufacturing activity started picking up. Raw material prices started moving up in June-July. In October and November, the increase is frequent and steep, says R. Ramamurthy, president of Coimbatore District Small Industries Association.
The MSMEs cannot hold inventory and usually purchase raw materials from the local traders in small quantities. Prices of copper, steel, zinc and brass have moved up 30% to 35% since August, he says. “MSMEs which entered into annual contracts with government or private buyers are suffering a loss as they will not get higher price for the components supplied. In the case of end product manufacturers, they have no option but to increase the price of the products,” according to Mr. Ramamurthy.
The prices of steel and allied foundry items such as coke, pig iron, cast iron, steel scrap, CI boring, HR sheet, CR sheet, copper, and aluminium have gone up 30% to 35% in the last six months. Further, there is shortage in availability of some of these materials, too.
The government should fix a maximum retail price for the raw materials. Government organisations such as SAIL should open an yard in Coimbatore, Mr. Ramamurthy said in a press release. Coimbatore is the second largest consumer in the State of most of these raw materials, next only to Chennai. If industries need to source from SAIL yard, they need to go to Tiruchi or Chennai now and it is not viable for MSMEs. Hence, SAIL should open an yard here, he said.
The Central and State governments should take necessary steps to control the prices of raw materials. If needed, they should open up imports and ensure that MSMEs get the materials at a subsidised price, he said.
