Rise in raw material price hits struggling MSMEs hard

Aurangabad, Jan 22:

Paralysed during the pandemic, the Micro Small and Medium Enterprises (MSME) sector in Aurangabad faces a new challenge the rising raw material costs. MSME unit owners have said that those who place orders are unwilling to shell out more and want the consignments at pre-pandemic rates. The industrialists have sought central, and state governments help to tide over the steep hike in raw material prices.

The automobile and electronic sectors have recovered, and companies are taking production with full capacity due to the increase in demand for two and four-wheelers and electronic gadgets. While the MSMEs are getting new orders, raw materials prices have suddenly gone up by 50 to 100 per cent. With the steep hike in raw material prices, the small entrepreneurs that supply machinery and components are finding it challenging to give products to big companies at an older price. The SMEs face the heat of price rise in electronic and electric components, plastic and fibre parts. They are also facing other problems like a rise in the price of fuel. “We are not able to get a price rise from large companies that outsource from us. Also, the shortage of raw material is adding to our woes as we are not able to meet the delivery schedules,” said the president of the Marathwada Association of Small Scale Industries and Agriculture Abhay Hanchanal. "The small industries cannot afford to pay higher prices. Those who get orders take three to six months to execute them. If they are unable to honour the commitment, they face the risk of being black-listed. But the units will suffer a loss if they execute the orders at the agreed price,” he noted.

Prices of raw material

According to various trade associations, in the last five months, the price of stainless steel increased by 32 per cent, and is sold at Rs 200 a kg, aluminium by 26 per cent, and is sold at Rs 210 a kg, natural rubber rose by 52 per cent, being sold at Rs 156 a kg. Copper, a key component for many in the MSME sector, has touched Rs 600 a kg, increasing nearly 77 per cent. Similarly, the Polypropylene plastic which is essential in making all kinds of goods was Rs 78 per kg has touched Rs 100 kg and engineering plastic that was Rs 125 per kg has gone up to Rs 250 per kg. The price of electrical steel, the primary raw material, was increased by Rs 12,000 a tonne.

Reduce import duty and ban export

Companies in Aurangabad MIDC process 20,000 tonnes of plastic raw material every month. There are 400 steel processing companies in Aurangabad. More than Rs 3,000 crore worth of goods are procured every month from companies in Aurangabad MIDC alone. The industrialists said that they have to import raw material from China and Korea. However, there is a tremendous shortage as production was stopped for several months due to covid. The industrialists now have demanded to reduce import duty, and, immediately, ban the export of certain commodities, based on inland demand.