Sitharaman said coronavirus
would not lead to any price rise, but added this was a major concern highlighted by the industry representatives who cited congestion at ports. Senior officials said the government was exploring various measures to tide over the situation, including giving relief to micro, small and medium enterprises in servicing their loans.
“Banks will be encouraged to extend the window of servicing the loans by MSMEs by 15 days or so, as it will be a ‘force majeure’ event,” an official said. Another official said that to enable banks to do so, firms across sectors might invoke ‘force majeure’ with their suppliers and partners in China.
Force majeure refers to a clause that is included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations. The government will also actively consider the suggestion of airlifting formulations of essential pharmaceutical products and raw materials that will be exempt from or have lower import duties.
India depends heavily on China for active pharmaceutical ingredients (APIs). In 2018-19, India imported bulk drugs and intermediates worth $2.4 billion from China, making up 68 per cent of the imports, according to CARE Ratings.
A representative from the pharma industry is learnt to have suggested that India should list all the raw materials and products for which it is 100 per cent dependant on China. “If we can make special logistical arrangements to bring those items to India, as soon as the situation allows, we should airlift them,” the person said.
The industry also fears that China might soon block export of certain APIs for essential drugs to India, since it would need these for its own use. The industry has requested that India should talk to China to ensure such curbs on imports don't take place.
According to sources in the meeting, some sectors expressed concerns about a slowdown in activity, either due to raw materials not coming in from China or being stuck at ports, or because China and neighbouring Southeast Asian countries being major destinations for their exports. These sectors were pharma, solar, chemicals, iron, metals and steel, and marine food. Consignments are stuck at ports due to the Chinese not being able to provide paperwork from their end. A relaxation regarding such paperwork has been given at Chennai port and is being extended to other ports.
Some representatives said there were Indian manufacturers of the components that were needed from China, but these firms are fully export-oriented. "It will be of help if there are some export restrictions and we can use these locally-made components," said a person at the meeting.
At the briefing, Sitharaman said various secretaries of the finance ministry would take stock of specific sectors and interact with their counterparts in the relevant ministries before suggesting sector-wise and broad solutions to her on Wednesday. She said the Centre would come up with a road map for the short- and the medium-term for addressing “undue situation” that may arise due to coronavirus.
The FM acknowledged congestion at eastern ports, especially concerns raised by the fertilisers industry related to import of raw materials. She asked the industry whether western ports were also facing similar issues. She said the government would be alert to the fact that piling up of inventories did not cause price distortion. “We will not spend much time on measures, and interventions will come immediately,” Sitharaman said.