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Fuel price hike, high interest rate add to SMEs' woes
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Bikky Khosla | 28 Jun, 2011
The recent hike in rates of diesel and kerosene will again add to the woes of the small and medium enterprises (SMEs) as this will result in high input costs.
Industrial areas, where most of the SMEs are concentrated, face frequent power shortages and diesel is used as an alternative fuel for power generation. It goes without saying that the hike in the fuel price will invariably lead to increase in the production costs. Above that, there will be more inflationary pressure since logistic and transport costs will increase because of this price hike. Undoubtedly, this increase in logistic and transport costs will put SMEs in a more disadvantageous position.
Meanwhile, rising inflation has already taken its toll on SMEs in terms of rise in interest cost, and higher cost of raw materials. Even the country's largest bank, the State Bank of India, has lowered its credit growth projections for the current financial because it sees "clear signs of resistance from borrowers" whose "businesses are becoming unviable."
While the Reserve Bank of India (RBI) is trying to control inflation by raising interest rates, I don't see any impact as the rate of inflation still continues to hover around and above 9 percent. Now the question is 'Is RBI overdoing the rate hikes?' considering the fact that it has raised key rates a record 10 times in the last 15 months.
What surprises me the most is the fact that the current rate of run-away inflation is largely due to supply-side bottlenecks. Mere monetary tightening as displayed by the apex bank cannot bring this rate to a comfortable level.
As such the current situation doesn't speak too well about the growth of the SMEs in the country. Tell us what you think of of the current situation. Are you being able to get loans at an attractive rate? If not, how are you carrying out your expansion plans?
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Fuel price hike
Allan D'souza | Mon Jul 11 01:46:11 2011
Try pig-backing your consignments in containers that is half full.
And of course keep your wagon at home and take bus, train, etc.
THINK about joint loan applications for two SMEs where one application may not be passed. It is possible for an innovative banker to consider this. This can be worked out with the larger enterprise getting the bigger share of the loan and both the SMEs providing the personal insurance policies and hypotecation statements.
Fuel price hike
Chocklingam | Fri Jul 1 13:45:37 2011
Sir's
one thing worries me. I am not an industrialist. I borrowed a loan from a private bank. I got a loan for 120 months & i paid 48 months. According to me i need to pay back another 72 months. Where as i need to pay 88 months. Apart from that my salery not increased to this level. Government is giving loans for the farmers, and many time to get vote they cancel them. But for us we need to pay them all till our last date if they keep on increasing interest rate. I dont see any difference between government banks & local money lenders. The only difference is they have gundas & the banks dont have them.
inflation and RBI
Bakare suresh | Fri Jul 1 02:15:24 2011
I think RBI governing council is still in the medieval ages and using British rules to tame the Indian inflation trend. Inflation is a result of grid of the black marketers and people who control the supply chains. They don't need bank loans to run their business as they have inherited billions by their marketing strategies. What Indian government should do is impose strict bans on hoardings, export and pass on rigid rules and regulation and laws controlling them instead of foolish measures of increasing the PLR. What it has achieved in last one year? Is RBI council hibernating?
Availing loan at high rate
Pradeep Kr Agarwal | Thu Jun 30 12:01:10 2011
To keep the works going on I got sme loan sanctioned at 4% higher than the base rate though rate increased from 8% to 9.25%.Similarly increase in input cost of increased diesel price will have to be handled The growth of sme depends mainly on demand & individuals efforts. Nothing stops even if cost increases by 50%.
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Re: Availing loan at high rate
Avinash Chandra | Wed Jul 6 12:15:21 2011
Quite motivating statement, Mr. Agarwal. Actually, this spirit of the SMEs like yours is taking us ahead.
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Price Hike and double taxation
Ashish Sirsat | Thu Jun 30 11:50:21 2011
I have a small partnership firm in Thane. We are facing big problems in getting low interest loans. We have also started an agitation against Octroi. Octroi was to be abolished with implementation of VAT but still we pay octroi on even the VAT amount. Where is the need for Octroi? Only Maharashtra state's municipal corporations charges this entry tax.
not only fule and interest are hike,
P Vaitheeswaran | Thu Jun 30 09:02:48 2011
The manpower is the main problem for running the SME and MSME.
Fuel price hike, high interest rate add to SMEs' woes
Er. Amar Singh | Thu Jun 30 02:47:03 2011
The situation is extremely serious for supply side; the population is increasing at the rate of 30 millions per year and thus the pressure on the supply side. There seems to be no concern of the Government to put the population growth at a halt by strong steps.
Increasing of the interest rates is amounting to constraining the supply position. Certainly, this is not an appropriate step to contain price rise.
availing loan
JOS | Thu Jun 30 01:04:00 2011
I kept hold my expansion plans, due to unpredictable measures from government, petrol hike, intrest hike amd so on. where do get the people surplus amount to buy consumer durables, in this scenario.
Inflation and hike in price of diesel and petrol
S.V.Bodas | Thu Jun 30 01:00:16 2011
It is universal fact that the inflation will never come back.We have to prepare for this hike every now and then.The best way, I think is to reduce the cost of production in whatsoever means possible.Cutting the production cost is the only way to fight inflation or increase our earnings by curtailing unwanted expenditures.I have experienced in my life that there are many ways to bring down the production cost and save money in many ways.What one needs is a open mind and innovative approach to counter the inflation. One should never expect reduction in inflation at all.
Fuel Price Hike and Financial Load for MSMEs
Arulmurugan | Wed Jun 29 19:27:46 2011
Yes, the untimely increase in the prices of the fuel is big negative for all industrial segnemts, why govt is not reducing the tax component on the same, a reduction at input and outpuit level by central and state govt will absorb comfortably the prices upto 130 USD brentt. Since, we do not spend our tax collection on public welfare, why not give it back to them??
Banks will lend at 14-17% after getting all the collateral for 200% and personal guarantee ans stock of the cos. If i can borrow at 17% how much I should charge my customers, do we still have such customer, who will buy at 40-45% mock-up, if they exist, MSMEs can also exist
Regarding hike in fuel prices
Bhuvanvikram singh | Wed Jun 29 15:46:39 2011
Well,i agree what all u mentioned in your article but i feel like that in future we will definitely gonna find relief road.we will make up our minor losses at that point of time. B/c at this time we are helpless. Smart move is required & a slight change in marketing strategies.
FUEL PRICE HIKE
Kaushikk | Wed Jun 29 15:11:29 2011
SIR, DOES ANY ONE KNOWS HOW THE CRUDE OIL is purchased what is the procedure? How the order s are placed or contracts are done?
is there any discouint or commission offered on the quantity of CRUDE OIL taht is purchased regularly?
if there is GORSS ADN NET DISCOUNT IF AT ALL what happends to the dfifference?
why opil companies can ever make any loss inspite of in the MONOPOLY MARKET?AND STILL MAKE HUGE PROFIT AND GIVE LEVISH FAT SALARY , PEARKS, TO THE EMPLYOEES AND GIOVRE DIVIDENT TO GOVT AS WELL.
WHY NON OF THE OPPOSSITION PARTY MP ever ask these questions in the parlliament ?
gENERALLY SPEAKING THE COMMODITY WHICH MNAKES SO CALLE DCOMON MAN'S LIFE HELL, WHY IT DID NOT DAILY GETTING PUBLISHED IN THE NEWS PAPERS LIKE OTHER COMMODITY PRICES?
WHY GOVT IS NOT OPENING ITS CRUDE OIL PURCHASE CARDS PUBLICLY OPEN?
AND MOREOVER, TJHEREASRE ALL THE REASONS TO THINK AND BELIEVE THT THERE IS SOMETHING FISHY IN OIL BUSIENSS?
Generally people think what ever is done by GOVT MUST BE GENUINE REASON TO INCREASE PETROLEUM PRODCU TPRICES. ISF ONE TALK S OF SUBSIDY, IN FERTILIZER ALSO THERE IS SUBSIDY AND STILL THEY MNAKE PROFIT AND NOW THE UBSIDY IS GOING TO BE PAID DIRECTLY TO THE FARMERS. SIMILARLY HERE ALO OIL COMPAMNIES GETS PAID BACK ON THE SUBSIDY THAT IS GIVEN TO USERS IF I AM NOT WRONG THEN WHAT IS THAT GOVT TELLS US OIL COMPANIES RUN IN LOSS ?
Fuel price hike, high interest rate add to SMEs' woes
Surendera M. Bhanot | Wed Jun 29 12:49:20 2011
I do not agree with your contention that the SMEs or for that matter any other business enterprise is going to bear the burn of the fuel price hike as well interest rate hike. All they will do is to pass the load to the consumers, in the shape of any , mixture of them or all of them; (1)readjusting the packing size (commonly a unfair trade practice known as "Nonstandard Packaging"); (2) by offering a toned down version of the product; and by increasing the prices.
Despite all the previous hikes, all Industry and the SMEs have showing the rosy balance sheets with surplus. Their spending is lavish and no body's bother about these hikes. This just gives them a valid reason to jump and to have their way to exploit the situation. They will make a hue and cry for a while have their own way to manipulate.
And when it goes to consumer, its intensity is increased many fold. That means the actual consumer is going to get the goods and services at much higher rate, than had this burden been imposed directly of the consumers. SMEs and the Industry is not fools to bear the impact of increased costs directly on them. The Elite Class of consumers hardly constitutes mere 2-3% of the total population and such increases do not matter to them. The lower strata of society are already struggling to meet their minimum needs, and Government has heavily subsidized their requirements. So there is a little effect on them. So the major burnt is on the pocket of the Foolish (Middle) class. ....So the major burnt is on the pocket of the Foolish (Middle) class.
This is the unprotected class and is the most effective. If our
industry is sensible enough, they can keep a tab on their spendings and
give the consumers the best value of their products and services at
fair prices. However I do agree with the complete failure on the part
of Government and the Reserve Bank of India. The corruption is the
biggest devil and is at the helm of them all.
Fuel Price hike
C.R.Badrinath | Wed Jun 29 11:37:34 2011
There is no doubt this hike will hit the SME sector badly. At a time when global competativeness is the Mantra for sucess, external conditions will directly afect them.
Wages will also increase due to the general inflation and increase in cost of transport.
There is hardly any scope for offsetting this increase in fuel cost, power cuts, increase in transport costs, increase in interest rates, wages et all.
There will be no investment in the SME sector if the same trend continues.Government will have to think of some attractive schemes and subsidies to allow the sector to progress.
Poor common man
Kannan | Wed Jun 29 11:27:44 2011
The fuel price hike is unnecessary and unjustified. the salary paid by the oil companies is exorbitantly high. further, they give a very good ex-gratia payment to each employee every year. if they are running in loss from where can they pay such high salary and other benefits. why our media is silent on this. why can't they expose the oil companies and govt. please publish the balance sheet available in the annual report of these companies. the common man is simply exploited by the companies & the govt. it is understood that more than 50% of the petroleum products price is attributed by various govt. taxes. let the govt. curb their expenses and reduce the taxes by 50%. all the tv channels and papers should expose the companies and govt. for squeezing the general public.
BUSINESS
NIRANJAN GAJENDRAGADKAR | Wed Jun 29 08:20:27 2011
WOULD YOU PLEASE INFORM ME AS TO WHAT IS THE DIFFERENCE BETWEEN MICRO AND SMALL SCALE INDUSTRY?WHAT ARE THE BENEFITS FOR THESE INDUSTRIES?WHERE DO I GET THE INFORMATION REGARDING A MICRO INDUSTRY?IS IT SAME AS HOME INDUSTRY?KINDLY ENLIGHTEN ME AS I HAVE NOT RECD. ANY SASTIFACTORY REPLY TILL DATE. THANK YOU
Fuel price hike, high interest rate add to SMEs' woes
Magesh | Wed Jun 29 06:19:33 2011
The Fuel price increase is as much a problem as it is inevitable. To come over this the govt instead of raising the fuel on essencial could have taxed people using luxary cars running in Diesel and that money could have been used for ofsetting the subsidy and loss. By this the cost of essencial service wont increase.
Hike in fuel prices
NVSN Murthy, Scientist | Wed Jun 29 06:06:26 2011
Hike in fuel prices hikes production costs and hikes inflation and hikes burden on the poor man and common man who is already burdened heavily.
In principle, we should not hike fuel prices for which we need to absorb the rise by rising subsidy.
This logic is being followed by the rest of the world.
SME woes
SANJIV SARNAIK | Wed Jun 29 05:36:44 2011
Further to your editorial, following points need to be looked into.
Shortage of trained workers (Machinists, fitters, wiremans etc.) due to various factors like Raj Thakaray, white collar job attaction in Malls and call centers, poor salaries etc. Further, unhealthy competition/unrealistic pricing amongst the SME themselves, results in lower sell value of goods for everybody. Morever, the customers are paying 10 to 15 times more for imported equipment but for local makes the customer is unwilling to pay realistic prices. SME have no option to sell at unrealistic prices for survival. This, in turn, results in stagnation of SME as they survive, but, have no strength for development, expansion or technology upgradation. This is a vicious circle and frankly no SME has clear plans for overcoming this situation. The need of the hour is to strenghten the infrastuture, power supply and human resources.
Fuel price hike
Ashok Agarwal | Wed Jun 29 05:28:32 2011
Our Prime minister and the government is very fond of comparing the price of all commodities with the internaitonal prices in order to hike them. It would be interesting if they could also compare the wages of labour in India with the rest of the world alogside. This would put the price hike in correct perspective and show the how the Indian government is fooling around with the prices. If they hike the price of labour also in tune with the international market all price hikes will fall in place and no one will feel burdened by them.
It's time to take acton on corrupt politicians
Gaurav Bhagat | Wed Jun 29 04:16:15 2011
In our country, we have had a tradition of dedicating a statue or a memorial to a leader after his death. but Bloodie Mayawati is alive and the statue is there. Crores of Rupees have been wasted which could have been spent in needful purposes.
Answer
Carbunar Florin | Tue Jun 28 20:13:38 2011
You can attract anytime funding and loans into a business. Everything depends in the business plan.
Firms that had problems during this recession, it was because they did not have:
a) price risk management
b) currency risk management
c) risk management for the production system (the risk needs to be divided)
...........
So is only the fault of enterprises and not the system's.
Yours sincerely,
Florin Carbunar
Director (Chairman & CEO)
What we need to...
Citizen of India | Tue Jun 28 18:24:52 2011
The day the people stop depending on the Govt. of India, India will be truly free. This was also the philosophy of Mahatma Gandhi. At that time, the British were GOI, now we have British educated Indians as GOI. No wonder that Winston Churchill laughed when India won so-called independence.
SMEs need to improve their processes to cut down on unnecessary costs and improve efficiencies. Following six sigma processes will definitely help. Raising the salaries of productive employees is another step. SMEs should come out of the Lala mentality of squeezing the most out of a worker or a contract job with least amount of pay - keeping all the profits to themselves. Together with this, we have the most useless top management in the world. The so called top - have mostly inherited from their fathers. The ones who did it themselves - have no vision for the future since most SMEs are run as a single person/single family enterprise.
And there is lack of respect for each other at every level. So the Lala SMEs can always crib that its difficult to operate - the visionaries will make it happen anyway. So good luck, Small and Mediocre Enterprises!
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