The COVID-19 lockdowns have had a massive impact on economic activities. Several industries have faced a crisis during the lockdowns witnessing a sharp dip in their regular business. While the big industries have managed to sail through this crisis somehow, the situation for the small and medium industries has been grimmer. The MSMEs have been struggling with massive liquidity and supply crunch along with a shortage of labour and non-payments of dues during the lockdowns.
Now, reaching out to Prime Minister Narendra Modi, representative of MSMEs has recently written a letter requesting him to ensure government intervention in their issues. All India Council of Association of MSMEs (AICA), representing around 170 MSME associations urged the government to intervene after a massive spike in key raw materials prices hurt the MSMEs.
In the letter, the association said that this hike in the price of several key raw materials like steel, iron ore, aluminium, copper, plastics, PVC, paper and chemicals has caused an erosion of working capital for the MSMEs. The letter hinted that this spike was caused artificially by blocking and stocking raw material in the supply chain. Issuing a statement., AICA said that while this spike could be temporary because of the volatile situation created by lockdowns, it could cause permanent damage to the already struggling MSMEs.
The statement highlighted that despite a dip in the demand during the lockdown, prices of raw materials have witnessed only an upward trend. Prices for copper between April 2020 to June 2021 saw a surge of 109 per cent as it rose to Rs 745 from the earlier Rs 345. Similarly, the prices of steel plates have also jumped 82 per cent from Rs 45 to Rs 82 during the same period.
The association suggested that government should direct the public sector enterprises to accept cancellation of orders from MSMEs without putting a penalty or backlisting them. AICA further added that PSUs should publish the steel prices on a quarterly basis and these prices should be maintained for a minimum period of 3 months at a stretch.
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