MSMEs look at Foreign Trade Policy for relief from up to 50% spike in input, fuel costs – The Economic Times

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The Ministry of Commerce and Industry is likely to roll out its new foreign trade policy for a five-year period effective from April 1 in a bid to boost India as a leader in international trade.

It’s not just bigger companies that are facing input cost rise.

Medium micro, small and medium enterprises (MSME) are severely hit by rising raw material and fuel costs, prompting them to seek government help.

The rising prices of metals, plastics, fuel and other raw materials along with a shortage of shipping containers have been adding to the woes of the MSME sector, said Rupa Naik, senior director, MVIRDC World Trade Center, Mumbai – a trade facilitating organisation.

The Ministry of Commerce and Industry is likely to roll out its new foreign trade policy for a five-year period effective from April 1 in a bid to boost India as a leader in international trade.

The need to address the inflationary trend in commodity prices needs to be addressed as India’s MSMEs, which contribute over 48% of the country’s exports, are operating on too thin a margin to absorb this cost pressure, Naik said.

Also, the forthcoming foreign trade policy should provide renewed thrust on 235 commodities that witnessed strong growth in exports despite the challenging world economic environment amidst the pandemic.

The trade
In the calendar year 2020, India’s trade surplus across select 235 commodities grew to $33 billion from $12 billion in the previous year as imports declined by 14% to $27 billion, while exports surged 36% over last year, as per the data analysed by World Trade Center, Mumbai.

Out of the 235 commodities, pharmaceuticals including medical equipment and agro-products are the largest categories accounting for 22 percent each with an export value of $13.4 billion and $13.2 billion, respectively. Metals and chemicals stand at third and fourth positions accounting for 18 percent and 11 percent respectively, out of these 235 commodities.

MSME trade bodies in Karnataka have said that the operating cost of over 60 lakh medium, small and micro enterprises (MSMEs) in Karnataka will go up at least 30% due to the recent hike in petrol and diesel prices. Manufacturing, engineering, and auto component firms are hit the most as they have to run their machines on diesel gen-sets during daily power cuts.

Also, MSME operations are heavily dependent on transport and logistics as they have to deliver products to OEMs and procure raw materials on a daily basis.

Corrugated box makers

The rising input cost coupled with the unabated increase in kraft and board paper prices has forced the corrugated box manufacturers of eastern India to go for a voluntary shutdown of their units this month.

A release issued by the Eastern India Corrugated Box Manufacturers’ Association (EICMA) said, “The corrugated box industry comprising MSME entrepreneurs has been suffering immensely as it neither has any control on the unabated increase in input costs nor over escalating kraft paper prices. The situation is critical and the survival of the industry is under threat.”

Other inputs including steel stitching wire, starch, labour, energy, transportation and other costs have witnessed unprecedented rise thereby increasing the conversion cost by 40 per cent to 50 per cent, it said.

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