New Delhi, Nov 3 (Agency) Strong demand in the run-up to the festive season has boosted market sentiments, but for many Micro, Small and Medium Enterprises (MSMEs), Deepawali has failed to generate enough spark. The high cost of raw materials leading to suppressed margins has taken the shine off the festive celebrations with many small enterprises finding it tough to manage the show. Rajeev Kumar Goel, president of the Bawana Manufacturers Welfare Association, said that sky-rocketing raw material prices, coupled with high fuel and freight charges, have taken a heavy toll on the industry.
“Micro and small manufacturers are not doing well at all. The demand has certainly increased this festive season compared to last year, but profit margin is negative. Prices of diesel, petrol, packaging material, plastic granules all have shot up,” he said. Talking about the plight of his atta (wheat flour) business, Goel said that he buys wheat for Rs 21 a kg from the government and sells atta for Rs 23 a kg with barely Rs 2 left to cover all the costs. “You can imagine how we have been managing,” he said. Convener of Consortium of Indian Associations (CIA) KE Raghunathan sided with Goel, stating that 80 per cent of micro enterprises could not give salary this time around because of their poor financial health.
“Those who have orders, don’t have material. Those who have orders and material don’t have labour. Those who have all three don’t have working capital. And those who have orders, raw material, labour and working capital don’t have profits,” Raghunathan noted. Micro and small enterprises have been among the worst-affected during the pandemic times with a sizeable chunk of them shutting shops or moving to other businesses. Vinod Kumar, President of India SME Forum, however, said that it’s back to celebration time for the MSMEs as demand has picked up and order flow from overseas has increased. “There are certain supply shortages being faced across various sectors but majorly we are seeing a revival. In the last two years, small enterprises have worked a lot on product, packaging and process innovation and they have resulted in increased productivity,” he said.