West Asia conflict: Small firms face big strain from energy and cost shocks

Rising gas prices, disrupted routes threaten MSME margins and output: CII

Seeking support for the micro, small and medium enterprise (MSME) sector amid the West Asia crisis, the Confederation of Indian Industry (CII) has urged the government to facilitate alternative sourcing of raw materials, provide clarity on gas supply availability, and offer temporary relief on port storage.

 

The MSME industry, CII said, has reported major disruptions in shipping and logistical operations due to evolving geopolitical developments in West Asia. Changes in shipping routes are creating longer transit times and higher transportation costs for smaller companies.

 

In some cases, export consignments have remained stranded at ports for extended periods or have been returned to India. The industry body has suggested measures such as warehousing support at nominal charges and a simplified Customs framework to facilitate the re-import of goods.

   

In a letter to MSME ministry secretary S C L Das, CII Director-General Chandrajit Banerjee warned that if supply chain disruptions persist, several sectors could face production interruptions.

 

Banerjee highlighted several emerging concerns, including logistical disruptions, rising freight and insurance costs, raw material supply constraints, gas availability for industrial use, and working capital stress among MSMEs due to the geopolitical developments in West Asia.

 

Manufacturing sectors such as glass, ceramic, chemical, and metals — which rely heavily on continuous furnace-based operations — could face operational shutdowns and huge financial losses if gas supply is suddenly disrupted.

 

“Temporary relaxation or fast-track approvals related to import restrictions, quality certification, or standards requirements may be considered for critical raw materials to enable Indian companies to source supplies from alternative countries where necessary,” the industry chamber suggested.

 

CII said industry members have also reported considerable volatility in prices of key raw materials and industrial inputs, putting severe pressure on the margins and financial sustainability of MSME suppliers.

 

“Many industries rely on imported raw materials and intermediates from West Asia and related supply networks. The current geopolitical situation has begun to affect the availability and delivery timelines of several such inputs,” the letter elaborated.

 

Shortages and delays in procuring materials such as polymers, petrochemical intermediates, metal scrap, and solvents like methanol have started emerging.

 

The industry has suggested that government engagement with shipping companies and logistics providers could help address the sharp escalation in freight and insurance costs and improve visibility on shipping schedules.

 

Export-oriented sectors, CII added, have indicated potential disruptions in shipments to the Gulf region, Europe, and other markets due to logistical delays and rising shipping costs.

 

“Such developments may affect export schedules and contractual commitments of Indian companies, including MSMEs that supply components and services to larger exporters,” the letter to the MSME secretary observed. 

Stress signals 

• Route disruptions raise transit time, costs, and lead to stranded consignments
• Gas uncertainty threatens shutdowns in furnace-based sectors
• Rising input, freight, and insurance costs squeeze margins and working capital
• CII seeks alternative sourcing, gas clarity, and port relief