Pune: MSMEs reeling under escalation in raw material, fuel prices as financial year nears end

Since the start of the Russia-Ukraine crisis, the cost of raw materials like steel and iron have increased by Rs 9 per kilogram. Thus prices that were Rs 38/kg at the start of the Covid-19 pandemic have now touched Rs 75/kg. Also, fuel prices have increased with further escalation not being ruled out. Units in the industrial zones of Pimpri-Chinchwad said this cost escalation has put them in a spot that they had not faced before.

Thanks to the ebbing of the Covid-19 wave, industrial units have a healthy order pipeline and are working full steam to fulfil the financial-year-ending orders.

Sandeep Belsare, president of the Pimpri-Chinchwad Small Scale Industries Association, pointed out units are now hard-pressed for time to finish their orders.

“Companies who we supply have signed contracts for supplies when raw material prices were low. But now the same amount will not cover our costs,” he said. Belsare pointed out that re-negotiation of contracts is now not possible. “Thus we are running our business in losses,” he said.

Companies, he said, would not be in a position to shed labour or take any cost-cutting exercises as they need to honour their contracts immediately.

At present, micro units are suffering the most with their operating margin being eaten into. Abhay Bhor, president of the Federation of Small Scale Industries Association, feared around 25-30 per cent of the units would face financial bankruptcy due to this trend. “We do not see any relief for the next three months. This March end is one of the toughest we have ever seen,” he said.