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Karnataka: MSMEs grapple with surge in raw material cost, manpower crunch

The Covid-induced lockdown imposed for prolonged periods has dealt a massive blow to the fortunes of thousands of micro, small and medium enterprises (MSMEs), with many of them staring into endless pits of despair.

Despite the restrictions being eased gradually and the government permitting the units to resume operations, these enterprises continue to face a host of other problems, ranging from lack of skilled manpower to the inflated price of raw materials. In Dharwad, Dakshina Kannada and Mysuru districts, more than 40,000 MSMEs have been identified whose productivity has suffered.


President of Kanara Industries’ Association Ajith Kamath sought to illustrate the magnitude of the problem with figures: “Nearly a fourth of the 8,000 MSMEs in Dakshina Kannada are not in a position to resume operations immediately owing to fiscal constraints, rise in the cost of raw materials and shortage of labour. More than the pandemic, the uncontrolled increase in the price of raw materials is hurting MSMEs.”
President of Kanara Chamber of Commerce and Industry Issac Vas said several MSMEs in Dakshina Kannada had been unable to pay salary to employees during the lockdown. “We have written to the PMO, requesting the Centre to consider paying employees’ wages from the ESI corpus. The package rolled out by the state government does not hold out the promise of an immediate solution. We want the Centre to ensure fuel prices do not rise for the next six months,” Vas added.

Although some MSMEs involved in the food and condiments sector registered a spurt in demand for their products, they were unable to exploit the opportunity to their benefit owing to the labour crunch.

General secretary of MSME Council, Mysuru (chapter), Suresh Kumar Jain, pointed out that the pandemic had a domino effect on the industrial sector. “When MSMEs struggle, larger corporations which rely on us for components and various other needs too suffer,” he said.

Mysuru Industries’ Association president Vasu is concerned about the exodus of labourers from urban pockets. “We do have skilled labourers among the local populace but we are apprehensive about resuming full-fledged operations given that not all restrictions have been lifted yet,” Vasu said.

Former president of Federation of Karnataka Chamber of Commerce and Industry Sudhakar S Shetty said that the sector was pinning its hopes on the state and central governments to save MSMEs. He reiterated the demand among all stakeholders to bring fuel under GST, which he said would help check the spiralling prices.

Persisting restrictions, argued Ramesh Patil, proprietor of Patil Electric Works in Hubballi, meant that it would be impossible for the unit to meet 20% of its annual output.

President of Greater Hubballi-Dharwad Industries’ Association RG Bhat said that delay in the arrival of raw materials had resulted in many of their orders being withdrawn. “Efforts are under way to secure more orders. The government must allow us to operate units with 100% of the workforce, and consider restricting the number of work days in a week,” he said.

President of North Karnataka Small-Scale Industries’ Association N S Biradar believes that the condition of MSMEs will improve only when the situation returns to pre-Covid times.