Ease of Doing Business for MSMEs: Higher commodity prices globally over the past 12 months are keeping businesses and governments on their toes as the world recovers from the effects of Covid. A micro, small but broad range of high crude oil prices due to a number of factors, along with a price rally for the various raw materials involved in making nearly every industrial product, including steel, copper, zinc, aluminum, nickel, lead, cement, and more. has had an impact. and Medium Enterprises (MSMEs) in the electrical and electronics manufacturing sector in India among others.
MSMEs are spread across the manufacturing and supply sectors of the sector. The electrical equipment market in India includes production equipment such as boilers, turbines and generators; Transmission and distribution (T&D), and related equipment such as transformers, cables, transmission lines, switchgear, capacitors, energy meters, insulators, and more. According to experts, the impact of the price hike has taken a toll on the operations of small businesses with severe liquidity crunch.
“The price impact is much higher in case of plastic or metal or even electronic components as compared to pre-covid. And unfortunately, MSMEs are not able to pass on this cost to the customers. Steel and aluminium, copper etc. have almost doubled. Same is the case with plastics. Polyamide and polycarbonate have also doubled. The second challenge has been in logistics, especially for exports with respect to container load and container cost. For example, if you were exporting to the Middle East earlier, it was practically free, but today you will hardly get any container and if you do get it, it will be at a very high cost,” says Vipul Ray it is said. , Managing Director, Elmex Controls told Financial Express Online.
Elmex Controls manufactures electrical terminal blocks and is also into electric wire termination technology. Ray is currently the President of the Indian Electrical and Electronics Manufacturers Association (IEEMA), which has around 1,000 members. The T&D equipment segment comprises 85 per cent of the electrical equipment sector in India while the production equipment segment accounts for the remaining 15 per cent. According to industry estimates, the industry’s output for fiscal year 2011 was $22.6 billion, with exports of $7.9 billion and imports of $8.6 billion.
Along with the impact on production, the challenge for MSMEs has also been on the supply chain side, while many have scaled down their operations. “In our business, we have halved our operations, which we were a year and a half ago. The main impact on MSMEs has been that their working capital requirement has increased with the rise in raw material prices. Then there are challenges related to transportation, material availability and supply chain. Freight rates have also increased by 2-8X. The bottom line is that many MSMEs have scaled down operations,” Harish Agarwal, CEO of Kolkata-based Supreme & Company, told Financial Express Online. The company manufactures and exports overhead line fittings and accessories for power transmission, distribution and sub-stations.
For example, the prices of key products like hot rolled coil have increased from around Rs 35-36 last year to around Rs 35-36 to Rs 70, while zinc increased from Rs 120 to Rs 280, aluminum from Rs 125 to Rs. In addition to miscellaneous input prices for 260 copper ranged from Rs 400 to Rs 700, Agarwal said.
Then there’s the lack of semiconductor chips, which power nearly every electric device, including smartphones, desktops, cars, refrigerators, washing machines, medical devices, and more. Covid-led disruptions in manufacturing new chips led to a decline and as a result, manufacturers have been unable to meet growing demand for months in a post-Covid world. Experts are pointing to the impact on makers of various electronic products ranging from cars to tablets, amid the lack of adequate chips during the current festive season.
“Most of the semiconductor manufacturing is in China. It is important to attract manufacturers to set up units in India so that the downstream can open up. We are actually looking at the government to pass a special package to attract investments in this segment. But I believe all this has already been discussed at the highest level in the government and MSMEs are ready to grab that opportunity. But there has to be a definite anchor manufacturer which is to be started in India,” said Indian Electrical And Electronics Manufacturers Association Director General Charu Mathur told Financial Express Online.
However, the government in February this year approved a Production Linked Incentive (PLI) scheme for IT hardware products such as laptops, tablets, all-in-one personal computers and servers worth Rs 7,350 crore over four years to manufacture these products. Was. Was. in India. Production in four years is estimated at Rs 3.26 lakh crore and exports at Rs 2.45 lakh crore, according to a statement by the Ministry of Electronics and IT in February. Also, it is expected that the scheme will lead to an additional investment of Rs 2,700 crore, generate direct and indirect revenue of about Rs 15,760 crore and create 1.80 lakh jobs.
This is significant as the government is looking at the Indian electronics manufacturing sector at around $300 billion in size by 2024-25, PTI quoted Minister of State for Electronics and IT Rajiv Chandrasekhar as saying at an event at the Public Affairs Forum last Friday. . . India (PAFI). The minister said the production of electronics has increased to Rs 5.5 lakh crore in five years from around Rs 1.8 lakh crore in the country earlier. The minister had said that electronics is the second largest trade commodity after hydrocarbons and petroleum. Moreover, earlier in the last week, the minister had said that the government would soon prepare a five-year plan to make India “an important player in the technology sector”.
According to the World Bank’s latest Commodity Market Outlook published last week, the government is trying to tap the opportunity in the overall technology sector, but volatility in commodity prices poses a challenge for countries ahead to adopt the right policies. Can do. “The sharp rebound in commodity prices is becoming more pronounced than previously estimated. Ayan Koss, chief economist and director of the World Bank’s Prospective Group, said in a statement last week that recent volatility in prices could complicate policy choices as countries recover from last year’s global recession.
For example, crude oil prices (averages of Brent, West Texas Intermediate and Dubai global benchmarks) are expected to average $70 a barrel in 2021 and $74 a barrel in 2022 as oil demand strengthens and pre-pandemic levels. reaches on. On the other hand, metal prices are projected to fall by 5 per cent in 2022 as against an estimated 48 per cent growth in 2022, as per the World Bank report, as a solution to the moderation in global growth and supply disruptions. After.