Press Release by All India Council of Association of MSMEs (AICA)

PRESS RELEASE

All India Council of Association of MSMEs (AICA), created by more than 200 MSME Associations covering approximately more than 10,00,000 MSME industries –  Pan India.

One-day closure of all industries across India on Monday, the 20^th Dec 2021 and one-hour peaceful demonstration in front of the respective Collectorate/District Magistrate Office to press for the intervention of the Hon’ble Prime Minister to reduce raw material prices at the level of prices prevailed during April 2021.

About 10 lakhs MSMEs across pan India are closing their operation for a day in support of this call by AICA which will result in a production loss of Rs.25,000 crores, in addition to loss of employment for many.

Major Associations such as CODISSIA, TANSTIA, SIEMA, ICCIC, IIF, ARISE etc. will be taking part in this one-day closure and demonstration and MSMEs from other States like Punjab, Haryana, Orissa, Assam, Karnataka (Entire Belgaum region), Gujarat, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra and Madhya Pradesh are supporting us by closing down the operations of their member industries on 20.12.2021.

MSMEs are the backbone of this economy, contributing to 30% of GDP, 48% of Exports and creating job opportunities to 12 Crore people, which translates to about 40 Crore people of India (one-third of our population approximately) who are dependent on these MSMEs.

It is a matter of grave concern to all MSMEs across India that the prices of raw materials continue to rise for reasons not known.  We have represented this alarming matter through our memorandums to Hon’ble Prime Minister and various other Ministers in the Union Government with a request to control raw material prices, but unfortunately, nothing has happened and the situation of the MSMEs has only worsened day by day due to the alarming increase in prices of input materials. It is highly worrisome that inspite of our repeated Representation to the Government, the prices are not controlled and is increasing continuously.

It must be noted that the steep hike in the price of raw materials across all sectors, despite low consumption of raw materials and subsequent drop in the production (Quantity) by MSMEs – directly leads to loss of employment, and depreciating value of rupee – due to Raw Material price increase.

MSMEs are faced with huge challenges like –

• Sustenance at stake due to erosion of Working Capital on account of the huge rise in prices of

Raw Materials like steel, iron ore, Aluminum, copper, plastics, PVC, paper, chemicals, etc.

• There is no price escalation clause for public sector projects.
• It appears cartels working together at the cost of the Country’s Interest.
• Open Market not accepting full effect of Raw Material Price Increase.
• Nonavailability of basic raw material.
• Blocking and Stocking of Raw Material in the entire supply chain.

Status of MSMEs in India:

• MSMEs are not able to execute orders taken at a much lower price.
• They face the uncertainty of getting blacklisted by the PSUs and large corporate if they don’t honor contracts.
• Project contractors and engineering exporters with firm price contracts are very badly affected.
• In the current scenario, the benchmark for the steel industry pricing is not the demand and supply situation in India, but it is driven by the International market prices.

­­­­Possible Solutions to overcome this crisis:

1. Request for reducing the raw material prices which were prevailing during April 2020 and fix MRP (maximum retail price) for all raw materials.

The price comparison chart is given below for easy reference:

COMMODITY PRICE COMPARISON

The above figures make one ponder if the PSUs and Corporate should make such huge profits when MSMEs are getting extinct!

2. Protection against escalation for some period: Easy mechanism to hedge steel for all MSMEs, NSIC should act as a consolidation agency. They should be in a position to consolidate and hedge overall steel quantity in the marketplace. This kind of hedging should be possible for a period of one year (as the rate contract extends for a year) NSIC should make bulk bookings of steel at a price with the option of taking deliveries within 12 months as fixed.
3. PSUs to accept cancellation of orders, receive fresh quotes from MSMEs: Public Sector Enterprises must be instructed to accept cancellation of orders from MSMEs with no penalty / black listing as the steel price increase is a Force Majeure event outside the control of the MSMEs.

Government must ask all public sector and stock exchange-listed industries/companies to revisit the steel orders placed with MSMEs, renegotiate considering the revised price in the market, and place an amendment order. All MSMEs under government contracts and suppliers to PSU, should be allowed to revise their prices with a fresh quote. For all finalized government and PSU supplies, MSMEs should be allowed to invoke the escalation clause and requote.

3. The formula should be derived for price escalation: SAIL / Steel Industry must publish steel prices of Long products, Flat products, and HRC coils on a quarterly basis. The price should be maintained firm for a period of a minimum of three months at a stretch.
4. The quota for MSMEs at a concessional price: PSUs like SAIL and Vizag steel should focus on MSMEs for the supply of materials on a priority basis and all steel industries should allocate at least 40% of their production for Indian MSMEs.
5. GST-based funding: GST-based funding is needed for all MSMEs at a very low marginal rate. This will encourage MSMEs to purchase raw materials.
6. Allow import based on cost and quality: Government should allow the import of all steel materials based on cost and quality requirements at a Nil import duty (No anti-dumping) and also ban the export of iron ore and steel products. It may be noted that better GDP growth can be realized if value-added products are exported rather than raw materials. This will generate employment too.

In this regard, the All India Council of Associations for MSMEs calls for the following actions from all MSMEs across India:

1. Participate in the National Level Press Conference at 00 AM on Wednesday, the 15^th Dec 2021 to be held virtually and help spread this message across India.

NATIONAL PRESS CONFERENCE ON ABNORMAL INCREASE IN PRICE OF RAW MATERIAL.

Join Zoom Meeting

https://us02web.zoom.us/j/6909671992?pwd=aGJzQk40U2FNcHBJWmNFMkVSNk13UT09

Meeting ID: 690 967 1992

Passcode: ABcD500Link:

2. One-day closure of all industries across India on Monday, the 20^th Dec 2021, and one-hour peaceful demonstration in front of the respective Collectorates to press for the intervention of the Hon’ble Prime Minister in this subject.

3. Show the strength of MSMEs to the Government of India in a peaceful manner and draw its attention towards this subject of grave concern for all of us.

It should be noted that our government has always advocated strongly for the development of entrepreneurship. However, if the MSMEs get crippled and choked this way, due to the spiraling price rise of raw materials, it will only discourage entrepreneurship, ultimately against the Government’s objective of Atma Nirbhar Bharath.

We, therefore, urge the Government to take concrete steps to reign in Raw Material prices at once and SAVE THE MSMEs.