A tripartite meeting involving the Government, industry associations and the banking sector to identify and sort out the problems faced by SMEs in the State has been suggested by the President of the Indian Chamber of Commerce and Industry (ICCI), Coimbatore.

The SMEs were reluctant to commit fresh investment in capacity addition in a situation where they face so many uncertainties, he said.

Speaking to Business Line , Mr R. R. Balasundharam, President, ICCI, said the price of key raw materials such as pig iron, coke and oil and the cost of cutting tools had gone up by nearly 25-30 per cent in the past two years. The price of pig iron had shot up from Rs 26,000/tonne to Rs 34,000/tonne and a tonne of coke now costs Rs 34,000 compared with Rs 26,000 earlier.

Financial costs also added to the pinch as bank interest rates had spiked up to 16 per cent. This was in addition to other charges such as inspection fees, ledger fee. Bank finance, apart from being costly, was hard to get for SMEs and he felt that the interest rate for the SME sector should be capped at 12 per cent.

Mr Balasundharam said labour force also was becoming scarce and costly. In the past 24 months, while casual labourers’ wages have jumped from Rs 100 a day to Rs 250 a day, that of skilled labour has spiralled from Rs 350 a day to nearly Rs 600/day.

He said the industry has to battle on several fronts — increasingly costly raw materials and labour and the uncertain power supply.

On the overall cost increase for the industry, he said the cumulative cost increase after absorbing a portion from customers would be around 15-20 per cent. Capacity utilisation had come down by nearly 30-40 per cent, particularly because of power cut and peak hour restrictions, mainly in power-intensive industries such as foundries using electric induction furnaces.

On whether there was flight of SME businesses from the region to other states, he said it was difficult to estimate due to their size and operations. But this was possible in case of power-intensive or export-oriented units, he said.

During the recent visit of Mr Harmander Singh, Industries Commissioner and Director of Industries and Commerce, Tamil Nadu, to Coimbatore, he sought steps to address the problems of SMEs.

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