Gunjan Krishna, commissioner, industries department, said most large industrial units have returned to normalcy both in terms of productivity and sales. However, medium and small industries are still struggling as they grapple with multiple issues including cash flow and rise in commodity prices.
“The rising cost of production has been a big challenge for industries across sectors, although the recovery rate is higher than expected as pent up demand is driving sales,” Krishna said. “The exponential rise in prices has been the main deterrent. We hope the problem is transitional and that supply constraints will ease soon.”
The hike in price of steel is a major hurdle and industrialists are demanding that the Centre intervene and ban exports till prices stabilise at a lower level.
“It is an emergency and it calls for an ad hoc policy to curb steel exports temporarily. Besides this, production costs are increasing because of rising prices of motor fuels. The government should check this by reducing tax rates on fuels,” said S Sampathraman, chairman, All-India Manufacturers Organisation.
He said pig iron that was sold at Rs 30/kg before the second wave of Covid-19 is now selling at Rs 43/ kg. The price of cold rolled iron sheets has gone up from Rs 42/kg to Rs 88/kg, while the price of hot rolled sheets has shot up from Rs 40/kg to Rs 80/kg.
Demand from China
“The price of steel is shooting up because of rising prices of raw materials including iron ore and coal. It is also linked to the global phenomenon of rising demand with countries like China indulging in heavy procurement,” said Mani Manuel, general manager of JSW Steel. “However, lately, prices have been easing out and it has fallen to Rs 55,000 per tonne from Rs 65,000. It is expected to slide further.” Even other metals have become dearer. The cost of copper has increased from Rs 471/kg to Rs 751/kg from July 2020 to July 2021. Plastic granules, one of the main raw materials for most industries, has become dearer by Rs 75. It was sold at Rs 300/kg in April this year, but now costs Rs 375/kg.
MSMEs worst hit
The price rise has hit the MSME sector the most as units are finding it difficult to sell products at a rate that factors in rising input cost. While prices of raw materials were hiked during the lockdown, manufacturers were forced to hike prices of products accordingly. However, there have been instances of buyers refusing to pay at new prices and have invoked contractual clauses of the agreement signed earlier.
“We cancelled two such agreements as selling products at old rates is not viable,” said MS Shankar, who runs a furniture manufacturing unit at Hoskote industrial area.