The Hindu Business Line : Raw material price hikes hurting SSIs

SSI units are entering into rate contract with customers without a "price variation clause," which means that manufacturers will have to bear the burden of any price increase.

Chennai , Jan. 6

THE frequent increase in the cost of raw materials, including aluminium, copper and zinc, is badly affecting small-scale industries (SSI).

In the last three months, aluminium price has increased by 25 per cent to Rs 1.18 lakh per tonne, cost of copper by 30 per cent to Rs 2.24 lakh per tonne and zinc by 55 per cent to Rs 1.25 lakh per tonne, according to Mr K. Gopalakrishnan, President, Industrial Estate Manufacturers' Association (IEMA).

"We are in deep trouble and do not have an option but to close our units temporarily or permanently. We cannot absorb such an unprecedented price hike," he told presspersons. "Some of us would even be forced to commit suicide," said an association office bearer.

According to Mr Gopalakrishnan, there are about 3.5 lakh SSI units in Tamil Nadu employing about 30 lakh people. Already about 1.5 lakh units have closed down, and there is a danger of further closure due to the price hike, which is an all-India problem.

SSI units are entering into rate contract with customers without a "price variation clause," which means that manufacturers will have to bear the burden of any price increase. These units use about 3,500 tonnes of aluminium ingots per month, Mr Gopalakrishnan said.

There are five major domestic producers - National Aluminium Company Ltd, Bharat Aluminium Company Ltd, Madras Aluminium Company Ltd, Hindalco and Indalco. In the last three months, they increased the aluminium price five times, said Mr D.E. Ramakrishnan, President, National Confederation of Small Industry.

Mr A.V. Seshakumar Reddy, President, Tamil Nadu Cable and Conductor Manufacturers' Association, said the primary producers say they are forced to hike price of their products due to increase in the London Metal Exchange. "This cannot be a justification. They need to take local market conditions into consideration. The Central and State governments should control the price when primary producers form a cartel and exploit the situation," he said.