Huawei’s ‘Make in India’ project hangs in balance

By: |
New Delhi | July 27, 2015 12:33 AM

Huawei's plan to set up unit stuck over levy of anti-dumping duty

huawei Make in IndiaShenzhen-based Huawei Technologies’ plan to set up a new telecom equipment manufacturing unit in the Sriperumbudur special economic zone (SEZ) is frustrated by a lack of commitment from the commerce ministry. (Reuters)

The success of the Modi government’s ‘Make in India’ campaign would hinge a lot on China, which is looking for investment opportunities abroad after decades of export-led growth, but New Delhi seems to stymie even modest proposals from Chinese firms to shift production here.

Shenzhen-based Huawei Technologies’ plan to set up a new telecom equipment manufacturing unit in the Sriperumbudur special economic zone (SEZ) is frustrated by a lack of commitment from the commerce ministry to review a prohibitive 266% anti-dumping duty on the telecom gear (Synchronous Digital Hierarchy Transmission equipment) imported by the firm.

While Huawei said it would increase the value addition in India with the new assembling units to be set up, the ministry, sources said, hasn’t given an assurance to the company that the duty would be revoked as a result.

The company, which anyway has been waiting for 19 months to get the security clearance for the new unit from the home ministry, is learnt to have asked the commerce ministry to specify the level of value addition and investment for it to avoid the dumping duty.

However, the ministry, to which the quasi-judicial Directorate General of of Anti-dumping & Allied Duties is attached, is dithering. Meanwhile, several other firms which are subject to the anti-dumping duties on SDH and their industrial users have approached courts.

Additionally, Huawei’s plea for sales from its SEZ unit to the domestic tariff area (DTA) consumers hasn’t been allowed by the  ministry. The Chinese company’s investment commitment in the country as of now is around $570 million.

Responding to FE’s queries, a Huawei spokesperson said: “Currently, we have not received any official communication from government agencies with respect to our approvals. In fact, we are eagerly awaiting an official government response in this matter.”

The anti-dumping duty, meant to offset the “injury” caused to domestic manufacturers due to SDH imports from Chinese and Israeli exporters at prices below the levels in their domestic markets, has been effective since December 8, 2009, in the range of 3-266%.  These levies will be in force till December 7, 2015.

Official sources said the delay in all these approvals is because the commerce ministry wants to ensure that the company is not evading/avoiding/circumventing the anti-dumping duty by importing components in a completely knocked down/semi-knocked down condition and then assembling it without much value addition, investment, manufacturing or employment generation in India.

Trade analysts have long emphasised the immense potential of India-China economic ties, but the reality is far from impressive. Total FDI flows from China to India during April 2000-May 2015 were just $1.1 billion (or a minuscule 0.43% of the total $256 billion worth total FDI inflows into India during the 15-year period). India’s trade deficit with China has ballooned from just $1.1 billion in 2003-04 to a whopping $49 billion in 2014-15, or four times India’s exports to China in the fiscal.

During his India visit in September last year, Chinese President Xi Jinping had committed investment of $20 billion in India over five years and agreed to provide greater market access to Indian products. However, there has been no major headway on this; during Prime Minister Narendra Modi’s visit to China in May, the Indian side took up the matter with Beijing.

Huawei established a full-fledged manufacturing facility in the Chennai SEZ in 2011, where it manufactures optical network equipment. It also has a contract manufacturing arrangement with Flextronics.

Red tape

*  Anti-dumping duty up to 266% being levied on telecom gear (SDH) since 2009
* Huawei ready to increase value-addition in India; new assembling units being set up
* No word from commerce ministry yet on revocation of the duty; suspects duty circumvention
* Huawei’s plea for sales from its SEZ units to DTA hasn’t been met either
* Firm yet to be intimated by home ministry about the reported security clearance
* Huawei’s investment commitment in India is around $570 million
* FDI from China to India during 2000-2015 just $1.1bn,  or 0.43%, of $256-bn total FDI inflows in the period
* India’s trade deficit with China rose from $1.1 bn in FY04 to $49 bn in FY15

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