War in Ukraine affects Indian MSMEs

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NEW DELHI : Millions of small businesses are struggling to source their inputs as high commodity prices overseas incentivize manufacturers to sell their products overseas. Representatives of micro, medium and small enterprises (MSMEs) said they were forced to postpone new orders pending finalization of new raw material purchase prices.

Steel prices have risen by $200-250 per tonne globally compared to Indian prices, and MSMEs are worried as they are unable to compete with global buyers. “We are forced to reduce our overhead and production costs, and this is having a negative impact on our bottom line. The situation is such that buyers, both in B2B and B2C, are not able to absorb these prices and there is a strong monthly drop in the prices of raw materials such as steel, polyester raw material and even in textiles,” the Federation said. India’s President of Micro, Small and Medium Enterprises (FISME), Animesh Saxena.

Last week, fuel prices began to rise after a long gap, thanks to assembly elections.

Petrol and diesel prices were revised up for the fifth time in six days on Sunday, bringing the overall rise to 3.70-3.75 per liter on automotive fuel.

“We have had a number of consultations with the government, and they are sensitive to our issues. But unfortunately, we don’t have a price regulation mechanism in place, so nothing has been done yet. The government says it’s a free economy and they can’t interfere,” Saxena added.

Questions sent to spokespersons for the Ministries of Micro, Small and Medium Enterprises and Commerce and Industry on Saturday went unanswered until press time.

While engineering exports remain robust, exporters remain concerned about rising costs, said Engineering Export Promotion Council (EEPC) Chairman Mahesh Desai. Desai said EEPC has approached the government to address concerns of MSMEs facing a sharp increase in raw material prices and shipments, which is having a big impact on their operating costs and margins.

“All our exports are reserved at the old tariffs, and now steel prices and shipping costs have increased due to the Russian-Ukrainian crisis. We have asked the government to help exporters, especially MSMEs, with additional funding and special rates to fulfill orders amid rising costs,” Desai said.

Mint earlier reported that several European ports were not allowing Russian ships to dock and ships were stuck due to the blockade in the Black Sea and the Sea of ​​Azov amid growing container and ship shortages. which drove up freight rates. Also, most of the major shipping companies are European, which do not accept Russian containers, which has an impact on several Russian containers bound for India.

EEPC’s Desai added that they would also renegotiate prices with buyers as old prices are no longer sustainable and new orders take time to complete due to high input costs.

AS Firoz, former chief economist at the steel ministry, said the crisis presented opportunities for steelmakers to enter markets such as Europe and North Africa. He said the domestic steel market has not fully recovered from the covid-19 disruption, but the export opportunity could help them expand and improve their margins.

The umbrella organization of Indian exporters, the Federation of Indian Export Organizations (FIEO), has identified sectors in which Russian exports to the EU exceed $500 million. The EU buys steel products worth $3.8 billion from Russia.

“Higher demand for steel would likely continue as demand from the West is good. It could stay that way for six to seven months because even if the war ends in Ukraine, it will likely take longer for the country to rebuild the country. national industry,” Jindal Steel and Power Ltd (JSPL) managing director VR Sharma said.

The EU accounts for 15% of Indian exports and shipments to the region grew by 59% to $50.7 billion in the 10 months to January 2022.

“There is currently a strong increase in exports, but these are indirect exports. India exports raw materials such as cotton, iron ore and steel and high commodity prices increase the value of these exports. But the government is not focusing on the export of finished products produced by MSMEs,” Indian SME Forum Chairman Vinod Kumar said.

“We MSMEs are dependent on a few suppliers, and so is our bargaining power, and if input costs continue to move in this way, we will not be able to protect our margins. This has created a huge danger for the sector and also for the jobs created by the sector,” Kumar added.

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