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MSME body requests JPC model to control irrational raw material price increases

G Balachandar Chennai | Updated on June 11, 2021

Coimbatore Tamil Nadu 14/04/2021: MSMEs in Coimbatore are hit by frequent increase in raw material prices. Photo:Periasamy M/ The Hindu.   -  The Hindu

Prices have gone up to 70% in 1 year, say associations

Associations representing micro, small and medium enterprises (MSMEs) continue to seek government intervention to control the irrational increase in price of raw materials such as iron, steel and non-ferrous materials as survival is under severe threat for thousands of engineering SMEs, which are already reeling under the impact of coronavirus.

MSME associations point out that all steel producers have been jointly increasing the prices without any rationale, causing immense damage to lakhs of MSMEs that are lifelines of Indian economy,

“We request the Union government’s immediate intervention to control the prices through Joint Plant Committee (JPC). Alternatively, a regulatory commission could be formed to protect both consumers and producers,” said A Shanmuga Velayuthan, Chairperson-MSME Committee, Divine Bharat Chamber of Commerce.

Earlier, prices were controlled by the Joint Plant Committee (JPC) and raw material prices were increased once or twice a year. Of course, the quota system was also there, he added.

Rising steel prices

Primary producers of steel including PSU major SAIL (Steel Authority of India Ltd) have all increased the prices of HR sheet, CR sheet, MS angle, MS Channel and pig iron among others. Prices of these materials have gone up in the range of 46 per cent to 73 per cent in the past one year, he stated..

Also, the non-ferrous materials such as copper, aluminum, zinc and tin have been increased in the range of 51 per cent to 107 per cent between May 2020 and May 2021. Indian producers of copper and zinc sell their raw materials based on the LME (London Metal Exchange) price, which is fixed on a day-to-day basis.

Most of the MSME players accept firm price contracts from government departments/undertakings and private sector.

Amid huge increase/fluctuations in prices of raw materials in the past one year, MSME units have not been able to increase even on a monthly basis. It is really challenging particularly in the case of government departments that float tenders with 180-day validity period and placing orders with the delivery schedule of 6-12 months.

“MSME units are forced to supply the materials at loss mainly for their survival. MSME sector is squeezed between the primary producers of raw materials and end users,” said Velayuthan.

Recently, a leading steel producer in the country declared a net profit of ₹7,000 crore for January-March 2021 quarter for pandemic-hit FY21. The same company incurred a loss of ₹1,600 crore in the year-ago quarter, he added.

He pointed out that there is no abnormal increase in production cost of steel makers as their key raw material iron ore is available plenty in the country.

The Union government’s intervention in controlling the prices of raw materials will immensely help lakhs of engineering MSMEs that are battling to survive after the impact of pandemic, he said.

Published on June 11, 2021

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