Manufacturing and MSMEs | Heading for a slowdown

For Delhi-based exporter Pankaj Bansal, the disruption has been punishing. Bansal, who ships engineering goods and agri commodities across the Middle East, US and Europe, has seen freight costs surge manifold due to war surcharges. The cost of sending a container to Dubai has jumped from $150 (Rs 14,000) to $2,500 (Rs 2.35 lakh); for refrigerated cargo, it has spiked from $900 (Rs 84,000) to $7,000 (Rs 6.58 lakh). “Due to higher freight costs, buyers from the Middle East and even the US are either cancelling orders or seeking postponements,” he says.What is unfolding for Bansal is an early signal of a wider shock—the spillover of the tensions in West Asia into India’s manufacturing ecosystem. From ceramics and foundries to plastics and apparel, smaller businesses are the first to feel the pressure, with production cuts, supply disruptions and early signs of shutdowns already visible.The Rs 53,000-crore ceramic tiles industry relies heavily on propane and natural gas for production. “Currently, around 400 LPG-run MSME (Micro, Small and Medium Enterprises) units of the 750 in Morbi, Gujarat, the second-largest tile cluster in the world, are shut down,” says Haresh Bopaliya, president of the Morbi Ceramic Association (Wall Tiles Division). The remaining 350 units, which use natural gas pipelines, are operational but have scaled back production, he says. As a result, most manufacturers are selling from existing stock. Exports to the Middle East have also been hit by logistical challenges and supply-chain disruptions. Exports account for 40 per cent of the industry’s revenue, with the Middle East contributing 15 per cent, largely from key ceramic clusters of Morbi, Rajkot and Thangadh, among others.CRISIL Ratings estimates export revenue may decline by 6-7 per cent (around Rs 1,300 crore). According to the agency, the domestic ceramics and tile sector may grow at just 4-5 per cent this fiscal, instead of the projected 7-8 per cent. Nitin Kansal, director, CRISIL Ratings, says: “If the situation persists for another 2-3 weeks, it may lead to longer shutdowns and substantial losses, resulting in a 1-2 per cent revenue decline this fiscal.”Down south, in Coimbatore, about 30 per cent of 250,000-plus MSME units—foundries, aluminium units, fabrication, powder coating, laser cutting and pump manufacturing—have been affected due to non-availability of LPG since March 9, leading to a 40 per cent drop in production, says M. Karthikeyan, president, Coimbatore District Small Industries Association. Coimbatore, a major hub for pump and motor manufacturing that supplies over 40 per cent of India’s requirements, is seeing revenue impacts of up to 30 per cent.Crude-linked sectors are also under pressure as crude-based derivatives are primary inputs for several products across major sectors—plastics, synthetic fibres (nylon, polyester), rubber, paints, solvents and packaging materials. The plastic processing industry is dependent on imports for polymer raw materials. Of the total annual consumption of 24 million tonnes (MT), 8-9 MT is imported, including about 3 MT from the Gulf region. “All imports from the Gulf have stopped, and supplies from China, the US, Korea and parts of Europe have also been affected due to rising sea freight costs, leading to at least a 45 per cent increase in raw material prices in March itself,” says Arvind Goenka, regional chairman (northern region), Federation of Indian Export Organisations. WHAT IS BEING DONEThe government is working on a Rs 57,300 crore economic stabilisation fund to help cushion the adverse impact of the war. It has also announced a Rs 497 crore Resilience & Logistics Intervention for Export Facilitation (RELIEF) scheme, offering insurance support to exporters with exposure to West Asia.Moreover, benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme for all eligible export products have been restored with effect from March 23; the benefits were earlier cut by 50 per cent.WHAT MORE NEEDS TO BE DONEThe industry stakeholders have sought an extension of credit repayment timelines for exporters and importers, as shipment delays are leading to slower payments. There are also calls for freight subsidies to partially offset the sharp rise in logistics costs and ease pressure on margins.Similarly, the industry wants more intervention on the logistics front: curb arbitrary pricing by shipping and logistics players and ensure greater transparency in freight charges. Exporters are also seeking that Indian consulates in the region set up dedicated helpdesks for stranded shipments, negotiate waivers on demurrage charges at UAE ports, and coordinate with global shipping bodies to help restore normal cargo movement.- EndsPublished By: Shyam BalasubramanianPublished On: Mar 27, 2026 20:19 IST

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Manufacturing and MSMEs | Heading for a slowdown

Manufacturers face rising freight costs, gas shortages and stalled exports, as war tensions play havoc on India's MSME ecosystem

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