Codissia urges Centre to control raw material prices to protect MSMEs

Codissia Sounds Alarm on Surging Raw Material Costs

The Coimbatore District Small Industries Association (Codissia), a key voice for small industries in one of India's bustling manufacturing hubs, has stepped up its campaign against skyrocketing prices of essential raw materials. Aluminium, copper, and steel—backbones of countless MSME operations—have seen sharp increases that are squeezing profit margins to the breaking point. Codissia president M Karthikeyan recently penned letters to the Union ministries of mines and steel, demanding urgent action to curb these escalations. Businesses in Coimbatore, often called the Manchester of South India for its textile prowess and pump city fame, rely heavily on these inputs for everything from motors and pumps to auto components and jewellery. The plea comes at a critical time when MSMEs, which form the bedrock of India's economy, are grappling with global market volatility and domestic supply chain glitches.

What makes the situation particularly dire is the mismatch between global and local price hikes. While international prices for aluminium and copper have climbed 7% to 15%, domestic rates in India have jumped nearly 20%, hinting at opportunistic pricing by local traders. For instance, aluminium sheets vital for pump and motor manufacturing shot up from Rs 240 per kg in October last year to Rs 320 per kg now. Copper has followed suit, rising from Rs 900 per kg to Rs 1,300 per kg. With MSME profit margins hovering between just 5% and 8%, these jumps spell trouble—potentially leading to order cancellations, export slumps, and even unit closures. Codissia warns that without swift intervention, the sector risks extinction, undermining national goals like Make in India.

Specific Demands for Government Relief

Codissia's wishlist to the Centre is clear and multifaceted, aimed at flooding the market with affordable supplies. They want import duties on aluminium and copper scrapped entirely to ease availability, alongside a temporary ban on exports of these materials to prioritize domestic needs. Fixing a maximum retail price (MRP) for raw materials, enforced for at least three months, is another key ask to prevent premium gouging by sellers. The association also pushes for large producers and public sector units like Steel Authority of India Limited (SAIL) to reserve at least 50% of output for MSMEs on a priority basis.

"While aluminium and copper prices are linked to international market trends and have risen by 7% to 15% globally, prices in India have increased by nearly 20%, indicating artificial price escalation by domestic traders. With MSME profit margins typically ranging between 5% and 8%, a 20% increase in raw material costs would disrupt operations," said Codissia president M Karthikeyan.

On the steel front, Codissia met Tamil Nadu Chief Minister M.K. Stalin to highlight shortages despite the recent reopening of a SAIL yard in Peelamedu after 12 years. Though a welcome move on 3.5 acres to stock ready steel and offer long-term deals with discounts, MSMEs still face stock unavailability there, while private dealers hoard the same products. Codissia urges better direct access and quality improvements to make it truly effective. They also suggest the state form a committee to study price data and push the Centre with a detailed report—no other state has done this yet. Representations to the Prime Minister, Finance Minister, and others are on the table to reign in prices fast.

Broader Challenges and Hopes for MSME Revival

Coimbatore's MSMEs have long voiced frustrations beyond just prices, including a 35% raw material cost surge post-GST implementation years ago. They've sought single-window clearances, subsidies for expansion, marketing aid for trade fairs, and bulk procurement by bodies like the National Small Industries Corporation (NSIC) for competitive distribution. Defence procurement tweaks, like recognizing MSME consortia as offset partners, are also in play. These small units power half of India's motor and pump needs, export prowess in wet grinders and auto parts, and keep the local economy humming. Yet, lockdown-era demand drops ironically coincided with price spikes in steel and pig iron, compounding woes.

The SAIL yard's launch offers a glimmer, promising stable pricing through MoUs till March 2025 and tailored supplies. Former Codissia president R. Ramamoorthy stresses flexible financing for units shifting from trader credit cycles. If governments act on these pleas—controlling prices, boosting supplies, and prioritizing MSMEs—the sector could rebound stronger, fueling GDP growth and employment. Codissia's proactive outreach to state and central leaders underscores the urgency: save MSMEs now, or watch a vital engine of India's industry stall.

In summary, Codissia's urgent call highlights raw material price chaos threatening Coimbatore's MSMEs, with demands for duty cuts, export curbs, MRP fixes, and priority supplies. Positive steps like the SAIL yard provide hope, but coordinated government action is essential to safeguard this cornerstone of the economy.