Fisme to Siam: Share rising input cost burden with MSME vendors

FISME has asked SIAM and automobile OEMs to help MSME auto component suppliers absorb rising wage, energy and raw material costs linked to the West Asia crisis

The Federation of Indian Micro and Small & Medium Enterprises (FISME) has written to the Society of Indian Automobile Manufacturers (SIAM) seeking equitable sharing of extraordinary cost escalations faced by its micro, small and medium enterprises (MSME) auto component suppliers, amid sharp increases in wages, energy prices, and raw material costs due to the West Asia crisis.

 

In a representation dated May 14 addressed to SIAM President Shailesh Chandra, FISME Secretary General Anil Bhardwaj urged SIAM and its member original equipment manufacturers (OEMs) to consider temporary cost-sharing arrangements to absorb a part of the exceptional wage escalation and energy cost increases faced by MSME suppliers; faster approval and implementation of price revision requests where extraordinary cost increases are demonstrable; and expedited payment cycles for MSME vendors by having all OEMs register with TReDS (Trade Receivables Discounting System) and enable MSME suppliers to get their receivables discounted.

 

 

FISME also urged SIAM to consider a structured OEM-MSME dialogue mechanism to address emerging supply chain stresses before they reach disruptive proportions, and encourage long-term vendor sustainability frameworks instead of purely transactional procurement approaches.

 

The letter noted that unlike vehicle manufacturers, which operate in a relatively protected tariff environment and benefit from structured market conditions, MSME component manufacturers face relentless global competition from suppliers in countries such as China, Thailand, Vietnam, Malaysia, and Taiwan. Their pricing power is negligible, margins are wafer-thin, and bargaining asymmetry within supply chains has steadily intensified.

 

The letter further stated that recent geopolitical disruptions in the Middle East have aggravated this fragility. Escalating energy prices, logistics disruptions, shortages of cooking gas, and the sharp rise in household living costs triggered labour unrest across several industrial clusters. In many cases, following prolonged agitations and near riot-like situations, MSMEs had no option but to agree to wage increases reportedly averaging 20 per cent in Uttarakhand and 35 per cent in Haryana.

 

Further, input costs have increased dramatically across the board. Consumable oils, tools, power, and raw materials have increased by more than 35 per cent since March 26. “For MSMEs, this is not a routine cyclical challenge. It is an existential squeeze. A large section of component manufacturers remain locked into annual rate contracts and delayed price revision cycles, while their cost escalations are immediate and unavoidable,” the letter stated.

 

FISME said the consequence is severe erosion of working capital, rising indebtedness, and growing risk to production continuity. “It is important 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,” the letter said.