The Belgaum Chamber of Commerce and Industries (BCCI) along with all the Industrial Associations supported the cause of One day closure of all MSMEs on Monday 20th December 2021 due to Raw Material Price Hike and submitted the memorandum to the Deputy Commissioner and briefed about the problems facing by the MSMEs:
The following are the association supported for the cause
- The Belgaum District Small Scale Industries Association, Belagavi
- Institute of Indian Foundrymen – Belgaum Chapter, Belagavi
- Belgaum Foundry Cluster, Belagavi
- Confederation of Indianan Industry – CII, Belgaum Chapter, Belagavi
- North Belgaum Industries Association, Belagavi
- Kanbargi Industrial Area Association, Belgaum, Belagavi
- Belgaum Micro Industries Association, Belagavi
- The Belgaum Manufacturers Co-Op Industrial Ltd, Belagavi
- Laghu Udyog Bharati – Karnataka (Belagavi Unit), Belagavi
- Vishveshwarayya Industrial Park, Machhe, Belagavi
- The Belgaum Coal & Coke Consumers Co-Op Association Ltd, Belagavi
All India Council of Association of MSMEs (AICA), created by around 170 MSME Associations – Pan India has called for closure for one day of all industries in protest to constant “rising prices of raw materials”. It is a matter of grave concern to all MSMEs across India that the prices of raw materials continue to rise for reasons not known. AICA in consultation with other associations has represented this alarming matter through our Memorandums to Hon’ble Prime Minister and various other Ministers in the Union Government with a request to control raw material prices, but unfortunately, nothing has happened and the situation of the MSMEs has only worsened day by day due to the alarming increase in prices of input raw materials. It is highly worrisome that in spite of our repeated Representation to the Government, the prices are not controlled and is increasing continuously.
AICA in co-operation and consultation with other associations across various states jointly proposing the possible Solutions to overcome this crisis:
- Request for reducing the raw material prices which was prevailing during April 2020 and fix MRP (maximum retail price) for all raw materials.
The Price Comparison Chart is given below for easy reference:
COMMODITY PRICE COMPARISON
|Sl. No||Commodity||Price On April 2020||Price On Oct 2021||Difference In Price||Diff In %|
|1||Mild Steel Plate||45||82||37||82.22%|
|4||EN 8D Rod(Rough)||42||74||32||76.19%|
|6||Pig Iron (Foundry Grade)||32||44||12||37.50%|
|8||SS 304 Grade||220||300||80||36.36%|
|9||Kraft Paper (Packing Grade)||20||42||22||110.00%|
- Protection against escalation for ONE-year period: Easy mechanism to hedge steel for all MSMEs, NSIC should act as a consolidation agency. They should be in a position to consolidate and hedge overall steel quantity in the market place. This kind of hedging should be possible for a period of one year (as rate contract extends for a year) NSIC should make bulk bookings of steel at a price with the option of taking deliveries within 12 months as fixed.
- PSUs to accept cancellation of orders, receive fresh quotes from MSMEs: Public Sector Enterprises must be instructed to accept cancellation of orders from MSMEs with no penalty / black listing as steel price increase is a Force Majeure event outside the control of the MSMEs.
Government must ask all public sector and stock exchange listed industries / companies to revisit the steel orders placed with MSMEs, renegotiate considering the revised price in the market and place an amendment order. All MSMEs under government contract and suppliers to PSU, should be allowed to revise their price with fresh quote. For all finalised government and PSU supplies, MSMEs should be allowed to invoke escalation clause and requote.
- Formulashouldbederivedforpriceescalation:SAIL / Steel Industry must publish steel prices of Long products, Flat products and HRC coils on a quarterly basis. The price should be maintained firm for a period of a minimumofthreemonthsatastretch.
- QuotaforMSMEsatconcessionalprice:PSUs like SAIL and Vizag steel should focus on MSMEs for supply of materials on priority basis and all steel industries should allocate at least 40% of theirproductionforIndianMSMEs.
- Allowimportbasedoncostandquality:Government should allow import of all steel materials based on cost and quality requirements at a Nil import duty (No anti-dumping) and also ban export of iron ore and steel products. ItmaybenotedthatbetterGDPgrowthcanberealisedif valueaddedproductsareexportedratherthanrawmaterials.Thiswillgenerateemployment too.
Big Trouble for Small Companies
MSMEs are the backbone of this economy, contributing to 30% of GDP, 48% of Exports and creating job opportunities to 12 Crore people, which translates to about 40 Crore people of India (one-third of our population approximately) who are dependent on these MSMEs.
It must be noted that the steep hike in price of raw materials across all sectors, despite low consumption of raw materials and subsequent drop in the production (Quantity) by MSMEs – directly leading to loss of employment, and depreciating value of rupee – due to Raw Material price increase.
MSMEs are faced with huge challenges like –
- Sustenance at stake 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, chemicals etc.
- There is no price escalation clause for public sector projects.
- It appears cartel working together at the cost of Country’s Interest.
- Open Market not accepting full effect of Raw Material Price Increase.
- Non availability of basic raw material.
- Blocking and Stocking of Raw Material in the entire supply chain.
Status of MSMEs in India:
MSMEs are not able to execute orders taken at a much lower price.
They face the uncertainty of getting black listed by the PSUs and large corporate if they don’t honour contracts.
Project contractors and engineering exporters with firm price contracts are very badly affected. In the current scenario, the bench mark for the steel industry pricing is not the demand and supply situation in India, but it is driven by the International market prices.
It should be noted that our government has always advocated strongly for development of entrepreneurship. However, if the MSMEs get crippled and choked this way, due to spiralling price rise of raw materials, it will only discourage entrepreneurship, ultimately against the government’s objective of Atma Nirbhar Bharath.
We therefore urge the Government to take concrete steps to reign in Raw Material prices at once and SAVE THE MSMEs before they get extinct.