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LPG Crisis Halts MSME Production
1 Apr
Summary
- LPG supply cuts trigger cascading production halts for MSMEs.
- Firms reduce output by 40% to maintain operations.
- Limited alternatives and rising spot prices impact profitability.
Micro, small, and medium enterprises (MSMEs) are experiencing cascading production cuts due to disruptions in liquefied petroleum gas (LPG) supply. Since March 9th, commercial LPG has been completely stopped, forcing many businesses that rely 100% on this fuel to scale down operations significantly. Some firms have reduced production by 40% in an effort to stay operational.
These challenges place immense pressure on MSMEs, which constitute a vital part of the economy, accounting for 31% of GDP, 35% of manufacturing output, and 48% of exports. Even businesses that continue to operate are absorbing higher fuel costs by purchasing gas on the spot market, leading to a notable dent in profitability.
With limited alternatives, such as electric substitutes available to only 10-15% of industries, the situation remains critical. While pipe natural gas is being introduced as a potential solution, its faster implementation is awaited. The ongoing pressure on cash flow and the difficulty in passing costs to consumers suggest that conditions may continue to be challenging for these businesses.
