A small manufacturer may never buy a barrel of crude oil, but it can still pay the price when crude rises.
And this is not a small part of India’s economy. The Ministry of MSME’s dashboard records around 1.91 crore MSME registrations classified as manufacturing as of September 23, 2026. Across manufacturing, services and trading, registered MSMEs account for more than 42.7 crore reported employment opportunities.
The broader economic contribution is equally significant. According to the Economic Survey 2025-26, MSMEs account for 35.4 per cent of India’s manufacturing output and 31.1 per cent of GDP, while the sector employs more than 32.82 crore people across over 7.47 crore enterprises.
A market issue
For these businesses, commodity-price volatility is therefore more than a market issue. It can directly affect margins, working capital, pricing decisions and the ability to honour customer commitments.
A glass company faces volatility through exposure to furnace oil. A paint maker sees crude volatility through resins and solvents. A packaging company sees it through polymers. A lubricant manufacturer feels it through base oil. A chemical company faces it through feedstock. The common thread is that crude-price movements can eventually find their way into the cost of doing business.
This is particularly challenging for MSMEs, which often have less pricing power than larger companies. When input costs rise suddenly, a large manufacturer may be able to revise prices or renegotiate contracts. A smaller business supplying an OEM, retailer or distributor may not have that flexibility.
That creates a difficult choice: absorb the higher cost and sacrifice margins, or raise prices and risk losing the customer.
Practical risk management tool
This is where hedging can offer a practical risk-management tool.
Hedging is not about predicting where crude prices will go or speculating on commodities. Its purpose is to provide greater certainty over costs. By using appropriate market instruments, a business can protect itself against an adverse movement in crude-linked prices over a defined period.
Consider a glass manufacturer that has committed to supply a customer at a fixed price for three months. If fuel feedstock prices rise sharply during that period, the manufacturer’s margins can come under pressure. A hedge can provide a financial offset against part of that increase, helping protect the economics of the customer contract.
For an MSME, the benefit goes beyond margin protection. Greater cost visibility can improve business planning. It can make it easier to quote customers, plan purchases, manage working capital and forecast cash flows. It can also reduce the need for frequent price revisions, allowing smaller manufacturers to offer customers greater pricing stability.
Fewer buffers for MSMEs
Large companies may have dedicated treasury teams and greater bargaining power. MSMEs typically have fewer buffers. For them, managing input-price volatility can therefore be an important part of building resilience. The availability of exchange-traded risk-management tools gives smaller businesses an opportunity to address part of this challenge. The key is greater awareness and understanding of how such instruments can be used to manage genuine business exposures rather than take market bets.
For India’s vast MSME manufacturing base, the message is simple: an MSME may not be able to control crude prices, but it can seek greater control over how those price movements affect its business.
In a volatile commodity environment, moving from reactive pricing to proactive risk management could help MSMEs protect margins, improve cost visibility and build greater business resilience.
The author is Advisor-Corporate,Empire Industries Ltd