Coimbatore: All India Council of Associations of MSMEs (AICA), created by 170 MSME Associations covering approximately more than 2,00,000 MSME industries across Pan India, have submitted Representation on "Sustenance of Indian MSMEs - Immediate Intervention requested" due to the exorbitant increase in raw material prices to the Prime Minister of India, Narendra Modi.
Coimbatore: All India Council of Associations of MSMEs (AICA), created by 170 MSME Associations covering approximately more than 2,00,000 MSME industries across Pan India, have submitted Representation on "Sustenance of Indian MSMEs - Immediate Intervention requested" due to the exorbitant increase in raw material prices to the Prime Minister of India, Narendra Modi.
A press meet was organised by 'AICA' today on virtual mode in which office bearers of various industry associations participated which included CODISSIA president, Ramesh babu, immediate past president Ramamurthy, The Indian Chamber of Commerce and Industry, Coimbatore, President, Balasubramanian and various others from Coimbatore.
During the press meet members of 'AICA' conveyed their views followed by which they issued a press release in which it is said, "We are thankful to Government of India for the excellent leadership being offered under the stewardship of Hon'ble Prime Minister in managing the affairs of our vast country especially through a very challenging period. We are aware that our government is in a situation to manage multiple issues like social, economic, political and defence. We are sincerely very appreciative of the efforts in maintaining a balance on all sides and stand by this government solidly.
However, we are in a compulsive situation to bring forth the following points to the knowledge of the Government: 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. Our Sustenance is 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.
Open Market not accepting full effect of Raw Material Price Increase.
Blocking and Stocking of Raw Material in the entire supply chain. We understand this volatile situation is temporary in nature, however can cause permanent damage to the MSME sector. In spite of drop in demand due to lock down, prices are in upswing, particularly Steel, Pig Iron and other Raw Materials too. It is obvious there is cartel created by steel manufacturers, which include both Private and Public Sector Undertakings. Steel is an essential commodity for overall development of the country and exports should be as per availability of surplus.
Steel and other base material manufacturers are declaring 10 to 20 times higher profit whereas all the MSMEs are on the verge of extinction. This clearly shows that the Corporate and PSU Commodity companies are profiting at the expense of MSMEs. The price comparison chart is given for easy reference.
These figures make one ponder, if the PSUs and Corporate should make such huge profits when MSMEs are getting extinct. 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.
* Indian market steel volumes have come down by more than 21% in April 2021.
Possible Solutions to overcome this crisis:
1. Protection against escalation for some 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. 2. PSUs to accept cancellation of orders: 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.
3. Formula should be derived for price escalation: 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 minimum of three months at a stretch. 4. PSUs to revisit all orders to 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.
5. Quota for MSMEs at concessional price: 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 their production for Indian MSMEs.
6. PSUs should accept fresh quote: 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.
7. GST based funding: GST based funding is needed for all MSMEs on very low marginal rate. This will encourage MSMEs to purchase raw materials.
8. Allow import based on cost and quality: 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. It may be noted that better GDP growth can be realised if value added products are exported rather than raw materials. This will generate employment too.
Sir, 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 spiraling price rise of raw materials, it will only discourage entrepreneurship, ultimately leading to failure of the government's objective of Atma Nirbhar Bharath.
Representations made by all associations on this steep hike has yielded no response from the concerned ministries till date. 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. We hope and believe that the intervention of Hon'ble Prime Minister and Ministers will help MSMEs to sustain themselves and also move forward to achieve more than 40% of GDP - paving the way for increased entrepreneurship and employment generation.
The office bearers of industry associations mentioned that they have requested an APPOINTMENT with the Hon'ble Prime Minister of India, at the suitable and convenient date and time as per his calendar."
