Industrialists reeling under soaring raw material prices; 30 percent 'MSME' engineering firms temporarily shut down in Coimbatore

Coimbatore: SIEMA officials reveal that amidst the second wave of COVID-19 affecting various sectors across the nation, the prices of essential raw materials too have skyrocketed. Coimbatore industrialists are reeling in the present scenario with 30 percent of engineering companies having temporarily shut down.

Southern India Engineering Manufacturers' Association (SIEMA) President Karthik and Vice President Senthil Kumar stated that "More and more companies were from the effects of the first wave of the Coronavirus pandemic. Now with the second wave spreading fast, the industry is once again facing a huge challenge. The prices of various important raw materials used in the manufacturing industry, including copper wire, aluminum and stamping have increased. The stamping raw material was sold at Rs. 120 per kg and has now crossed Rs. 150. Copper wire has been sold in the range of Rs. 500 and has now crossed Rs. 750. The price of graft paper used to make cardboard has increased by 35 percent. The price of all types of plastic products used in the manufacturing sector has increased by upto 50 percent."

"With rising prices on one hand, the intermediaries and traders do not immediately provide the raw materials needed by the industry. They create an artificial shortage and make a profit out of it. All of these issues have caused industrialists a lot of struggle. Unable to cope with the crisis in particular, 30 percent of MSME engineering companies in the Coimbatore district have temporarily suspended production altogether. If this situation continues, workers' livelihoods will be severely affected," they opined.

"MSME engineering industry is facing the most severe crisis, while on the other hand, only corporates that manufacture and sell raw materials and sell a wide variety of fully manufactured engineering products have made remarkable progress. For example, the JSW Jindal Group from October to December 2019 gained the net profit of Rs. 197 crore from the sale of raw materials. The net profit for the same period in 2020 is more than Rs. 2,000 crore. When engineering products are manufactured and finally sold, corporates do not increase prices but reduce other costs, including the amount they spend on advertising, to keep product cost from rising. But the same cannot be done by engineering companies belonging to the MSME segment. This is due to the fact that MSMEs are the only ones who increase the price when the big companies do not increase the price when selling the products in the market. MSMEs are struggling to compete with corporates. So even though raw materials are sold and products are designed and finally sold, only corporates are dominating," they opined.

"This is not good for economic growth. MSMEs account for 40 percent of India's overall economic growth. Such measures will only lead to a complete disruption of the MSME industry by reducing that percentage and removing the importance of the industry. In order to address the current situation, we plan to take steps to reduce the cost of production of goods in the MSME industry, including the procurement of raw materials in bulk and the division into MSMEs, as well as to bring the existing issues to the attention of the Central Government by uniting the larger industry bodies at the national level," explained the SIEMA officials.