Steep hike in prices of raw materials are adding to MSME woes: AICA

According to the All India Council of Association of MSMEs, the rise in the price of raw materials has resulted in several challenges such as erosion of working capital, non availability of basic raw materials, blocking and stocking of raw materials in the entire supply chain and much more.
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According to the All India Council of Association of MSMEs (AICA), steep hike in prices of raw materials such as steel, pig iron, copper, aluminium alloy, etc, are adding to the woes of the sector.

In a statement released today, the association said the rise in the price of raw materials has resulted in several challenges such as erosion of working capital, non-availability of basic raw materials, blocking and stocking of raw materials in the entire supply chain and much more.

AICA consists of about 170 MSME Associations covering approximately more than 2,00,000 MSME industries across Pan India. The association has submitted a request to Prime Minister Narendra Modi for an appointment to discuss these issues.

According to AICA, the situation is alarming as MSMEs could be confronted with grave possibilities such as getting black-listed by PSUs and large corporates incase they fail to honour their commitments. The export market which will help in the recovery of the sector and the economy at-large might take a hit in view of the price hike.

Furthermore, the association shared data that indicates how much the prices have skyrocketed in the last one year.

The price of copper reached Rs 745 in June 2021 from Rs 355 in April 2020 (a 109.86 percent hike). Other important raw materials like aluminium alloy, mild steel plate, and CRCA sheet reported 94.34, 82.22 and 95.96 percent increase respectively.

AICA, in its appeal, also rolled out a slew of measures that could help the sector stay afloat amid the crisis. Action points such as PSUs accepting cancellation of orders, quota for MSMEs at concessional prices, GST-based funding, allowing import based on cost and quality, and more can help in controlling the damage within this sector, the statement read.

The Indian MSME sector contributes about 30 percent to the country's GDP and 48 percent to exports. According to a survey by Care Ratings — which was conducted between April 27 and May 11 with a set of 305 respondents, including small and medium businesses — as many as 84 percent of respondents said the deadly second COVID-19 wave escalated business uncertainty.

Edited by Anju Narayanan

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