is the sentence "all parts to be used IS as per the availability of materials" correct? or should it be "all parts to be used ARE as per the availability of the materials" or should I drop the linking verb?
The linking verb ("to be" and it's various forms) should match the subject of the sentence. In this case the subject is "All parts", which is plural. The correct sentence is your second example:
All parts to be used are as per the availability of materials.
Another way of saying the same thing that avoids the issue:
Each part to be used is as per the availability of materials.
"Each part" is singular, so there is no confusion between the number of the subject and the predicate.
Maybe it would be better to rearrange the sentence in this way:
Use of each part depends on available material.