MSMEs in Telangana bear the brunt of rising raw material cost

Ease of Doing Business for MSMEs: With increasing raw material prices, many MSME units across the state of Telangana are forced to temporarily shut down their operations.

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At the moment, 70 per cent of the operating costs are spent on obtaining resources and purchase of raw materials and 20 per cent for rentals and labourers’ wages.

Ease of Doing Business for MSMEs: Micro, small and medium enterprises (MSMEs) that were hit by covid are now facing the double whammy of increasing raw material costs due to inflation, especially of key commodities such as steel, plastic, aluminium and others. 

According to the report in The New Indian Express, the price rise to the tune of 6 to 7 per cent has severely impacted the operating costs and profit margins of MSMEs, especially micro and small enterprises. 

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The increasing wage cost is further impacting labour intensive small scale industries such as food processing and engineering units and metal industries. Witnessing their revenues drop to half, several MSME units in places like Balanagar, Cherlapally, Moula Ali and Kushaiguda have temporarily shut down their operations. Impact was worse on enterprises making plastic and steel products that are suppliers to large manufacturers as the price of steel was Rs 55,000 per tonne and plastic prices increased by 15 per cent.

According to data from Federation of Telangana Chambers of Commerce and Industry (FTCCI) the disruptions in the supply chain in the last two and a half years has spiralled the operating cost for businesses reducing their profit margin to just eight to ten per cent. 

At the moment, 70 per cent of the operating costs are spent on obtaining resources and purchase of raw materials and 20 per cent for rentals and labourers’ wages. 

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As per the report, Srinivas Garimella, Chairman of the Industrial Development Committee, FTCCI stated that the costs of raw materials have surged by 35 per cent, becoming a major burden for MSMEs. “We urge the State government to release pending subsidies and incentives. We also request the government to cut bank interest rates for MSMEs as the repo rate has gone up,” he said.

Anand Kumar of Navodaya Industries Association, Cherlapally stated in the report that because labour costs have gone up, they are unable to pay wages. “Owners of micro and small enterprises are finding it difficult to stay in the field,” he said. 

According to the state government, Telangana has 2.6 million MSMEs, out of which 56% are in rural areas. 

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