The Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the Society of Indian Automobile Manufacturers (SIAM) to help micro, small and medium enterprises (MSME) auto component suppliers absorb rising wage, energy and raw material costs linked to the West Asia crisis.
FISME states that the consequence is severe erosion of working capital, rising indebtedness, and growing risk to production continuity.
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In a representation dated May 14, FISME Secretary General Anil Bhardwaj urged SIAM and its member original equipment manufacturers (OEMs) to consider temporary cost-sharing arrangements to help absorb a part of the exceptional wage escalation and energy cost increases faced by MSME suppliers.
They also urged SIAM to consider a structured OEM-MSME dialogue mechanism to address emerging supply chain stresses.
Rising Input Costs
Recent geopolitical disruptions in the Middle East have aggravated the fragility of MSME component manufacturers, leading to escalating energy prices, logistics disruptions, shortages of cooking gas, and a sharp rise in household living costs, which triggered labour unrest across several industrial clusters.
In many cases, MSMEs had no option but to agree to wage increases reportedly averaging 20 per cent in Uttarakhand and 35 per cent in Haryana, and input costs have increased dramatically across the board, with consumable oils, tools, power, and raw materials increasing by more than 35 per cent since March 26.
Impact on MSMEs
For MSMEs, this is not a routine cyclical challenge, but an existential squeeze, as they remain locked into annual rate contracts and delayed price revision cycles, while their cost escalations are immediate and unavoidable.
It is essential to recognise that the resilience of India’s automobile industry ultimately depends not merely on the health of a few large manufacturers, but on the viability of thousands of Tier-II and Tier-III MSMEs spread across industrial clusters.
Seeking Equitable Sharing
FISME has written to SIAM President Shailesh Chandra seeking equitable sharing of extraordinary cost escalations faced by its MSME auto component suppliers, and they urged SIAM and its member OEMs to consider faster approval and implementation of price revision requests where extraordinary cost increases are demonstrable.
They also urged SIAM to encourage long-term vendor sustainability frameworks instead of purely transactional procurement approaches.
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