It never rains but it pours. Costly and delayed finance, dearer labour and expensive energy have taken a heavy toll on micro, small and medium enterprises (MSMEs) here. The Mullaperiyar dam issue between Kerala and Tamil Nadu has compounded the problem by making commute for workers between the States difficult.
Until recently, the going seemed good for the MSMEs as orders kept flowing and new machining and tooling units continued to come up. In recent days though, MSMEs seem to be in a state of fix. Industry sources say the trade is on the verge of coming to a halt. Fearing untoward incidents because of the dam row, a number of establishments have downed shutters.
“Workers living just on the other side of the border are unable to cross over and report for work. We have orders, but are unable to execute them as absenteeism is on the rise. If we seek extension of delivery schedule, the probability of losing not just this order but future orders is also high. We can neither let go what we have on hand nor are we in a position to accept fresh orders,” an industry source, preferring anonymity, told
Stating that MSME units have been facing the worst crisis ever, particularly in the last one year or so, the source said, “The trouble started when the cost of funds started moving north. There has been a sharp increase in the interest rates. From an offer rate of about 10 per cent around mid-February, the rates have risen close to 15 per cent and bankers do not inform us about the revised rates. We take cognisance of this only from the statement of accounts.”
Callous banks, govt
Mr D. Gandhikumar, Vice-President of Federation of Indian Micro, Small and Medium Enterprises (FISME), alleged banks of not extending adequate and timely finance to MSMEs. “The delaying tactics by the funding agencies is affecting the working-capital flow,” he said.
“Notwithstanding the high cost and lack of timely finance, the cost of energy — be it power, petrol or diesel — is also spiralling. Castings, textiles, foundry and re-rolling mills are power-intensive. The power cost alone works out to 40 per cent of the turnover for such units. The issue today is not just the steep increase in the cost of power, but power outages too, which is impacting the quality of the castings, yarn, etc,” said Mr Gandhikumar.
He further pointed out that raw material costs did not match with international prices, thus pushing the domestic manufacturing sector to a disadvantageous position. “The international price of aluminium is at least 30 to 40 per cent cheaper than the rates quoted here,” he said.
Blaming the regulations imposed by the Government and outdated laws for the present plight of MSME units, Mr Gandhikumar said, “The need of the hour is to amend such laws to suit the present.”
To a query on manpower availability, he said, “Many turners have since become auto drivers. The Mahatma Gandhi National Rural Employment Guarantee Act has played spoilsport, affecting the work culture. The MSME units are not only finding it difficult to get skilled labour, but the cost of supervision is turning out to be far more expensive. Workers shirk responsibility.”
The MSME units are at a crossroads, the FISME VP said, voicing apprehension about the future.