The COVID-19 lockdown has had a massive impact on economic activities. Many industries have faced crisis during the lockdown due to sharp drop in their regular business. While big industries have somehow managed to come out of this crisis, the situation of small and medium industries has become grim. MSMEs are largely grappling with liquidity and supply crunch as well as labor shortage and non-payment of dues during the lockdown.
Now, reaching out to Prime Minister Narendra Modi, the representative of MSMEs has recently written a letter requesting him to ensure government intervention in their issues. The All India Council of Association of MSMEs (AICA), representing around 170 MSME associations, urged the government to intervene after the MSMEs were hit by a huge jump in the prices of key raw materials.
In the letter, the association said that this hike in the price of several key raw materials like steel, iron ore, aluminium, copper, plastic, PVC, paper and chemicals has led to erosion of working capital for MSMEs. The letter indicated that this spike was artificially caused by blocking and stockpiling of raw materials in the supply chain. Issuing a statement, AICA said that while this spike may be temporary due to the volatile situation created by the lockdown, it could cause permanent damage to the already struggling MSMEs.
The statement said that despite the fall in demand during the lockdown, only an upward trend has been observed in the prices of raw materials. Between April 2020 and June 2021, copper prices saw an increase of 109 per cent, as it rose to Rs 745 from the earlier Rs 345. Similarly, the prices of steel plates also increased by 82 per cent from Rs 45 to Rs 82 during the same period. Period.
The association suggested that the government should instruct public sector enterprises to cancel orders of MSMEs without imposing penalty or backlisting them. AICA further said that PSUs should publish steel prices on quarterly basis and these prices should be maintained for a period of at least 3 months.
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