Industry fears supply chain disruption amid curbs on Chinese imports

In letters to DPIIT Secretary and Revenue Secretary, the US-India Strategic Partnership Forum said a sudden embargo on imports will adversely affect the supply chain of most products and ultimately India’s manufacturing.
Domestic and global industry bodies have taken issue with reports of ports across the country detaining Chinese consignments, writing letters to government officials on Wednesday protesting against the move. 

Global companies that manufacture here say the move will impact their supply chain and force them to halt production. Mobile device manufacturers, electronics and PC makers, and telecom equipment players, among others, have all been affected by the move as they depend on imports from China for components as well as finished products.      

In letters to DPIIT Secretary Guruprasad Mohapatra and Revenue Secretary Ajay Bhushan Pandey, the US-India Strategic Partnership Forum said a sudden embargo on imports will adversely affect the supply chain of most products and ultimately India’s manufacturing. This will also send a chilling signal to foreign investors who look for predictability and transparency, USISPF said in the letters reviewed by Business Standard.

“While we support India’s ambition to expand its manufacturing capability, we are concerned about the repercussions an unanticipated embargo on the import of goods from neighbouring countries will have on the supply chain and manufacturing,” USISPF President and Chief Executive Officer Mukesh Aghi wrote.

Though no formal orders have been issued, USISPF member companies have reported that Customs authorities have abruptly halted clearance of consignments coming in from China and other destinations at most major ports and airports.

A senior executive of a leading global manufacturer said: “While the move is directed at Chinese imports, companies that are adversely impacted happen to be from the US and Europe. To ask for 100 per cent physical verification of such goods will require 30 times more staff and that is ridiculous at a time when there is Covid-19. If this goes on we will have to stop all shipping into India.”     

In similar letters, MAIT, the largest industry body for Information and communications technology (ICT) firms, said the industry is unable to ramp up production to cater to pent up demand as companies restart operations after the lockdown. Any restriction on imports might harm firms that are already struggling to stay afloat, it said.

MAIT also said that every electronics manufacturing economy is dependent on China. “In this scenario, in the short term there are no immediate alternate options for sourcing raw material,” the body has said.

In a letter to the revenue secretary the Cellular Operators Association of India (COAI) said companies have been informed verbally by all major airports that a new examination process has been instituted for consignments of Chinese origin. 

Merchandise already cleared by Customs and loaded onto trucks are also being recalled for examination, potentially leading to soiling, spoilage and even pilferage, COAI said. With the resulting losses being borne by industry, the government could lose out on goods and services tax and basic Customs duties. 

COAI suggested that the government allow smooth movement of goods under the Authorised Economic Operator (AEO) programme, else the “trusted partner” tag earned by countries would be meaningless.  

Arguing that the pandemic had already caused Rs 40,000 crore worth of losses to the electronics and mobile industry, MAIT warned that the move will not only lead to customer dissatisfaction but also halt construction of telecom infrastructure. 

At present, the ministry is not keen on increasing tariffs on goods from China as this could hit manufacturing in India. However, a contingency plan prepared by the government bats for increasing duties on the top 100 imports from China.

However, officials warn that increasing tariffs will require research to see if importers can source goods from other nations. Considering that liquidity remains a prime concern, higher tariffs could lead to a price shock for importers. Moreover, the Covid-19 crisis is likely to push any decision on imposing tariff barriers until July at least, a senior official said.

China is the biggest import source for India with $62.37 billion worth of goods shipped to India until February.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel