“Steep Hike in Prices of Raw Materials Leading to Negative Impact on Engineering Industries “


Coimbatore is a manufacturing hub powered by MSMEs and caters to the manufacturing of pumps, motors,compressors and many other products in addition to being in valves and automobiles sector. MSME sector is a dynamic and vibrant sector that nurtures entrepreneurial talent, besides meeting social objectives including that of providing employment to millions of people across the country. As such, the growth of MSME sector is hindered by various factors in Finance, Marketing, Technology, Infrastructure, lack of skilled manpower, and Government Policies.

With the prices of raw material spiraling high, MSMEs are faced with severe cash crunch, resulting in erosion of working capital to most of them. The trend of raw material prices going up started in October 2017, and is going on, unabated till now. Hike in prices of Steel and other allied Foundry items like Coke, Pig Iron, Scrap, CI Boring, HR Sheet, CR Sheet, Copper and Aluminium, compared to July 2017 to March 2018 is between 30% and 35%. For your kind information, the price increase of Steel before GST and now is about Rs. 10,000/- per metric ton.

This has affected all the MSMEs that manufacture end products and those which operate under Annual Rate Contract, to complete their orders. Thousands of Small and Medium industries engaged in manufacturing activities using steel and allied raw materials, are badly affected, in not being able to keep up their commitments or to secure fresh orders for manufacture and supply. Post introduction of GST in July 2017, the price of steel continued to increase, despite free availability in the

market. With such sudden increase in the basic price of steel, wire rods, rounds etc. the manufacturing

activities in the Small and Medium enterprises in our region is badly affected, leaving the Industrial Units atgreat risk of becoming sick, subsequently leading to loss of jobs for thousands of workers.

This week alone, many Micro & Small Industries were compelled to stop their production due to the prevailing situation. The situation is likely to escalate in the near future, leading to closure of these Unitsowingtofrequent increase in the price of raw materials.

Moreover, Industries are unable to increase the price of their end products as that would render them less competitive in the world market. Thus the price increase of steel has directly affected the export activities in the Small Scale Sector. One must note that the prices were very competitive when the import of raw materials like steel, wire rods etc. were allowed.

But with Import Duty being increased and with the local manufacturers not being able to supply

raw materials at competitive prices, the MSMEs are getting crippled. It is learnt from the Steel Manufacturing sector that it would take few more months to stabilize and the prices

are likely to go up until such time. This can be physically verified with the defunct sale yard of SAIL which

remains non-functional for the past two years, which is directly impacting the MSMEs in Coimbatore.

If the same situation continues, it is very imminent that industries will face huge recession, leading to

joblessness and closure of units, impacting the socio-economic status of our nation.


We therefore request SAIL to open their sale yard immediately at Coimbatore to tide over the crisis of shortage of raw materials and also call upon the Central and State Governments to intervene on a war footing, to save the MSME sector by allowing import of metals and minerals and ease out the shortage.

CODISSIA would also like to request all the major manufacturers of steel in India to immediately withdraw the price hike of steel materials and allow the pre GST prices to continue without any change.


  1. SUNDARAM, President, CODISSIA.