Defence, aerospace MSMEs outraged over contract cancellation

The Modi government has allegedly cancelled orders worth thousands of crores of rupees with the Micro Small and Medium Enterprises (MSMEs) in the defence and aerospace sector in India, bringing these units at the brink of a closure that may cost 300,000 jobs.

Agitated over the move, members of the Federation of MSME Vendors of Defence and Aerospace told reporters here on Wednesday that the move belies Prime Minister Narendra Modi's emphasis on "Make in India" and self reliance in defence manufacturing.

"This move shall bring these units at the brink of closure and shall further result into unemployment of approximately 300,000. Of these 180,000 are associated with various ordnance factories and almost similar number with employment being provided by MSME companies. (This) will cause wide scale of bank defaults amounting in crores of rupees," said federation president Neeraj Raizaida.

There are 6,000 MSME units associated with defence industry. Eighty per cent of sub parts and complex assemblies of defence supplies are manufactured in MSME sector. according to a study.

He said the reason mentioned in the government communication to these unis was that the ultimate users of defence products -- the Indian armed forces -- for which they used to procure these items have curtailed down their requirements.

The allegations came amid parliamentary reporting findings that the Indian armed forces were facing a severe shortage of funds and were not able to maintain their stockpile of ammunition. Defence Minister Nirmala Sitharaman however has repeatedly rejected these charges, saying the government faced no crunch and the forces were adequately armed to face any emergency.

Raizaida said the government orders had created a lot of furore in the MSME sector -- considered one of the mainstays of the Indian economy. He said orders had already been placed by the MSMEs for raw material and advance payments made before the letters cancelling the contracts arrived.

"There shall be a very wide scale of macro- economic catastrophe. Raw material orders have been placed and advance payments made" which has blocked huge working capital, he said.

"We have approached the Ministry of Defence, the PMO, but there has been no response so far. We will file a PIL in the Supreme Court if the government does not attend to our complaint," said Raizaida.

According to the federation, the reason mentioned in the government communication is that "ultimate users (i.e Indian armed forces) for which they used to procure items have curtailed their requirements".

--IANS

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