Continued West Asia crisis deepens stress on manufacturing sector

The continued West Asia crisis has thrown the manufacturing sector into disarray, causing significant operational bottlenecks that show no signs of easing. This situation is affecting port operations, shipping activities, container movement, and energy supply — particularly Liquefied Petroleum Gas (LPG). These disruptions are driving costs higher, say industry players, expressing fears about a much bleaker future if conditions do not improve.

Kamal Bali, president and managing director, Volvo Group, noted that geopolitical disruptions and the resulting volatility in fuel and shipping markets were pushing up freight charges and product costs. “We are also seeing cost escalation driven by higher crude prices, along with longer lead times and higher logistics costs due to container shortages, port congestion, and extended transit cycles,” he said.

“We are optimising routing and inventory where feasible, and building contingency plans,’’ Mr. Bali added. He also said the operating environment was unpredictable, with potential for growth and inflationary shocks, although the current situation may seem manageable.

According to Prashant Gokhale, president, Bangalore Chamber of Industry and Commerce (BCIC), continued tensions will not only inflate input prices but also lead to critical shortages that impact production timelines and supply chain continuity.

Mr. Gokhale further noted that the effects would be deeply felt in sectors such as manufacturing, automotive, and engineering, where the cost of importing essential materials — ranging from metals to electronic components — was bound to rise sharply. “This surge in costs, coupled with longer lead times and the need for alternative sourcing strategies, will place immense pressure on operational efficiency and profitability,’’ he added.

The impact is most pronounced in MSMEs, which contribute nearly 30% to India’s GDP and some 45% of manufacturing output. With limited pricing power, rising LPG prices — critical for foundries, heat treatment, and fabrication — are directly compressing margins. The general engineering sector faces rising input costs and extended lead times, while aerospace and precision manufacturing, though less energy-intensive, remain sensitive to supply chain reliability, according to G. Prakash, chairman, Manufacturing Expert Committee, BCIC.

D.R. Subramanyam, co-founder and managing director of S.L.N Technologies, a city-based electronic systems design and manufacturing company that specialises in strategic electronics for aerospace, defence, and industrial sectors, the LPG shortage has severely hit producers and suppliers of mechanical enclosures for all kinds of electronics equipment, devices and racks for networking equipment.

“Most of these suppliers rely on LPG for heating processes involved in surface coating, painting, powder coating of cabinets used for electronics equipment and products across various industries. Equipment and devices have to be housed somewhere; we can’t sell them naked. As a result, the delay has more than doubled,” said Mr. Subramanyam.

Mr. Prakash, who is also the director at ACE Designers Ltd. - Turning Centre Division, further stated that the most immediate disruption was visible in logistics; fuel scarcity and price spikes have led to 5 to 10% delays in transportation cycles in certain industrial corridors, affecting both inbound material flow and outbound dispatches.

He also added that while the current phase reflected early stress rather than systemic disruption, a prolonged conflict could elevate inflation, moderate Index of Industrial Production (IIP) growth, and soften Purchasing Managers’ Index (PMI) momentum.

“The situation underscores a clear strategic imperative: energy diversification, supply chain localisation, and operational efficiency must accelerate. In an increasingly volatile global environment, resilience will define the next phase of India’s manufacturing competitiveness,’’ Mr. Prakash said.