Fabrication units in Tiruchi complain of difficulties in sourcing raw materials

At a time when public sector major, Bharat Heavy Electricals Limited, has been giving out a large volume of orders to its vendors in Tiruchi, the sub-contractors are complaining of difficulties in sourcing raw material, especially steel plates, and fluctuations in the price of raw material.

Fabrication units, which form the backbone of the MSME sector in Tiruchi, say they are facing short supply of raw materials, particularly steel plates of heavy-thickness and other critical materials.

“Sourcing raw material now is very challenging. Functional units are operating over and above their capacities. But some of the private steel manufacturers are seeking 100% payment advance, though SAIL accepts an advance and full payment on delivery,” said P. Senthil Kumar, chairman, BRAMAS Industrial Service Association, which consolidates requirements of raw materials such as plates and structurals and procures them for member units from steel mills.

The contractual delivery period for the vendors is typically in the range of four to five months. But steel plants frequently supply the material only after about four months. For the sub contractors, any delay in delivery of orders leads to punitive liquidated damages and have to bear substantial losses due to circumstances beyond their control, he said.

Expressing concern over the situation, the Tamil Nadu Boilers and Boiler Components Manufacturers Association has called for the intervention of the Union Minister for Heavy Industries. “MSME vendors are facing serious difficulties, particularly with regard to the availability and pricing of raw materials. During the last three months, prices of raw materials have increased sharply. These issues are affecting the smooth functioning and financial stability of MSME units in and around Tiruchi,” said Rajappa Rajkumar, Treasurer, of the association, in an appeal to the Minister.

Significantly, the problem has arisen at a time when the MSMEs have secured good volume of orders from BHEL, which has a healthy order book. “BHEL, Tiruchi, has placed orders aggregating to about 90,000 tonnes, and a large number of MSME vendors are finding it extremely difficult to get the required materials within the stipulated time,” Mr. Rajkumar said.

“Fabrication units in Tiruchi are already facing a geographical disadvantage. Being located in the south, we have to source the raw material from central India and transport the fabricated components to other parts of the country again. Tenders floated by BHEL are pan-India tenders with the same price and almost all project-site locations are in the northern part of India and the contract scope includes transportation to the site,” said Mr. Senthil Kumar, pressing for treating transportation as a separate extra rate schedule, payable on actuals, so that evaluation was location-neutral.

“We could not be competitive due to this and other issues. From what was once a thriving industry with over 400 units, we have already been reduced to just about 60-70 active units. Even these will vanish if the raw material is not available on time,” he said.

Mr. Rajkumar said the problem in getting raw materials could affect the delivery schedules of not only the MSME vendors but ultimately that of BHEL to its customers. MSME units are already operating under severe financial constraints and Mr. Rajkumar contended and urged the Minister to take up the matter with steel manufacturers, including SAIL, and ensure adequate and timely availability of the raw material to the MSME units in Tiruchi.