Ease of Doing Business for MSMEs: Over 10 lakh MSMEs associated with 200 national and regional industry associations in the country have urged the government to reduce raw material prices back to April 2020 levels. Represented under the umbrella of All India Council of Association of MSMEs (AICA), MSMEs said it would observe one-day closure of all industries on December 20 and demonstration in front of the respective collectorate or district magistrate office in their region to draw urgent intervention of Prime Minister Narendra Modi towards the issue. According to AICA, a one-day shutdown would result in a production loss of Rs 25,000 crores for MSMEs.
“MSME’s contribution would be at least 40 per cent of the December GST collections of Rs 1.3 lakh crore. The average production loss of a single day for these MSMEs combined would be nearly Rs 25,000 crore. The price rise has been for reasons unknown apart from Covid as raw materials such as iron ore, coal, etc., are in India and the government also doesn’t allow imports by putting anti-dumping duty for protecting the steel industry. How can MSMEs be competitive then?” R Ramamurthy, Owner of Coimbatore-based manufacturing manufacturer of storage tanks Sri Rang Enterprises and member AICA told Financial Express Online.
Per kilogram prices for multiple commodities have increased from April last year till October this year. According to the data shared by AICA, for instance, aluminium alloy has jumped 154 per cent from Rs 106 to Rs 270, copper has increased 119 per cent from Rs 355 to Rs 779, kraft paper has jumped 110 per cent from Rs 20 to Rs 42, engineering plastic has moved up 100 per cent from Rs 70 to Rs 140, among others.
As a result, MSMEs are not able to execute orders taken at a much lower price. They face the uncertainty of getting black-listed by the public sector units (PSUs) and large corporates if they don’t honour their contracts, the association added.
AICA has urged the government to ask PSUs to accept cancellation of orders from MSMEs with no penalty or black listing latter as particularly steel price increase is a ‘force majeure’ event outside the control of the MSMEs. The association also requested the government for ‘GST-based funding’ for MSMEs at a very low marginal rate to encourage them to purchase raw materials. The French term force majeure in business circles is referred to uncontrollable events, without any party being at fault, because of which enterprises are not able to carry out normal activities.
“We have kept April 2020 as the base year because before that period price variation was only 2-4 per cent but after that, the jump has been exponential of more than 50 per cent across categories. Moratorium offered last year wasn’t of much help to businesses as it didn’t reprieve MSMEs from interest payments. Now, in the current situation how would MSMEs sustain themselves. There are some units that have shut themselves down and started something new to get rid of the existing price and payment hassles,” Yogesh Pawar, Founder Association of Rising & Inspiring Syndicate of Entrepreneurs (ARISE) told Financial Express Online. The non-profit association undertake socially impacting projects on education and entrepreneurship to help MSME entrepreneurs grow.