MSME railway suppliers seek relief amid surge in raw material costs

Coimbatore: The Railway Equipment Suppliers Association has urged the Union ministry of railways to introduce immediate relief measures for MSME suppliers grappling with steep increases in raw material prices over the past six months.

Association president S Surulivel said prices of key metals such as copper, aluminium and steel have risen sharply by 80%, 60% and 30% respectively. In addition, the West Asian conflict has triggered a 100% increase in polymer and plastic raw material costs, placing further strain on small-scale manufacturers.

Suppliers from the MSME sector, who had secured purchase orders earlier at lower rates, are now finding it difficult to absorb these unprecedented cost escalations. As a result, many are facing delays or are unable to fulfil supply commitments, leading to penalties under existing railway procurement rules.

Industry representatives pointed out that penalties such as liquidated damages of 0.25% per week amounting to 1% per month — for delayed supplies -- along with general damages for non-supply have worsened their financial distress. They highlighted that the absence of a price variation clause for final products has resulted in significant losses.

In a representation to the railway minister, the association has sought invocation of the force majeure clause for all MSME purchase orders, particularly for copper- and aluminium-intensive products, with delivery schedules beyond Sept 1, 2025.

The body has also requested waiver of penalties for delayed or failed supplies, and a refund of penalties already collected after the specified date. It suggested that the relief could be structured on the lines of the “Vivad se Vishwas” scheme (a dispute resolution and settlement scheme introduced to reduce litigation and provide relief to taxpayers) introduced during the Covid-19 pandemic.

The association said the proposed measures are crucial to ensure the survival of MSME units severely impacted by volatile input costs.

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