Industry association India Cellular and Electronics Association (ICEA) has written to the government saying the move to check every consignment coming from China will disrupt supply chains, create shortage of products in the market, lead to millions of dollars of losses, and “spook” large foreign investors. ICEA, in a letter to Finance Minister Nirmala Sitharaman, said its member companies have received word from Chennai, Mumbai and Delhi airports about all China-origin consignments being subject to 100 per cent examination, even though there are no written orders by the government.
The body has also written to Revenue Secretary Ajay Bhushan Pandey and Central Board of Indirect Taxes & Customs (CBIC) Chairman M Ajit Kumar on the issue. “While this is well within the authority of Customs, there is a need to make a distinction between the kinds of products or companies that can be subject to 100 per cent inspection and the unintended consequences of such intrusive action, which includes opening each box or packaging in case of high-end electronics equipment, such as laptops, tablets, watches or smart phones,” it said.
ICEA said it understands that even goods already cleared and loaded in trucks for transport to warehouses are being recalled and examined. Such an act, ICEA pointed out, will result in pilferage and soiling of packaging and boxes, making it impossible for companies to sell such products in the market.
“This will lead to millions of dollars of losses, a shortage in the market and spook large foreign investors,” it added.
ICEA requested that a more sophisticated process, such as X-rays or additional paperwork be used to ensure compliance and genuineness of imports for such categories of high-end products, components and sub-assemblies that are extremely sensitive.
The association pointed out that at a time when the government is strategically targeting shifting investments of international firms (especially US and Japan) from China to India, a disruption in supply chain by way of disturbance at airports will not only hurt the supply chain of foreign companies but also an entire range of Indian companies that are entirely dependent upon Chinese imports of inputs in critical areas such as pharmaceuticals, automobiles, electronics and electrical machinery.
It is critical that at this stage to ensure the smoothest possible transition of supply chains to give India and global industry the confidence that India can be a “viable alternative with least bureaucratic challenges” when it comes to importing inputs that are required for functioning of vital supply chains, it added. Several companies are expected to import massive containers containing plant and machinery to shift capacity to India to benefit from the recently launched Production Linked Incentive (PLI) Scheme.
“Such delays in importing plant and machinery, while subjecting them to open inspection, is making companies nervous and shaking their confidence about participating in the PLI Scheme,” it cautioned. The association noted that the industry is already in very deep distress having lost production of over Rs 40,000 crore and has only recovered to less than 40 per cent of normalcy in wake of the COVID-19 pandemic.
Essential parts, components and accessories required for manufacturing in the 200-plus factories, which came up following the adoption of ‘Make in India’, ‘Digital India’ and ‘Phased Manufacturing Programme (PMP)’ in the mobile industry, are in the hit list, it said.
“We fear that if the supply chain is broken, then there will be severe shortage of essential communication, equipment required for health, work-from-home and online education goods such as smartphones, tablets and laptops, since alternative supplies are not available in the local and global markets amidst COVID-19 outbreak,” it added.
ICEA said these goods are contributing valuable customs duty and IGST to the Central and state exchequers.
An industry executive, who did not wish to be identified, said the consignments being held up could hit the industry more than the lockdown period, and even drive up the prices of smartphones in the country. Players including Realme, Oppo and Vivo did not respond on the matter.
A Xiaomi spokesperson said this is a “developing scenario and we are monitoring the situation closely”. “I think there is already some feedback from retailers that products are not reaching on time to them. However, this is likely to be solved soon as per our understanding,” Counterpoint Research Associate Director Tarun Pathak said.
He added that original equipment manufacturers (OEMs), at this point in time, can’t afford to lose sales because of consignments being held up at a time when factories are operating at below normal level.
Asked if this could push up the prices of smartphones, Pathak said “it is likely”. Faisal Kawoosa, founder and Chief Analyst at techARC, said brands need products as soon as possible to replenish the inventory with the latest models.
“Consignment being held delays the entire cycle impacting the availability of the products to the end consumers. Also, it adds to the many troubles that the industry is already going through,” he added.