The Indian electrical equipment and electronics industry has begun mass cancelation of orders by Chinese companies in the last few days and is searching for newer destinations for raw material sourcing.
Companies cancel orders mainly for distribution of power and transmission equipment and turn to other countries despite higher costs. After Prime Minister Narendra Modi ‘s vocal-for-local call, the process began in May. This month, the campaign intensified with restrictions on imports of power gear, but the industry wants to make sure that this does not cause disruption. It also says that the country needs to pool its testing facilities across sectors, as there are few in the power sector.
Indian Electrical & Electronics Manufacturers’ Association (IEEMA) President R K Chugh said that the industry has been importing raw materials, sub-assemblies and, in some cases, finished goods from China. Sunil Misra, Director General of the Association, said that the industry is responding to its call to move to alternative sources as it is in their own interest to move out of Chinese supply sooner.
“In the intervening period towards 100% Aatmanirbhar Bharat, we can shift to reliable and friendlier countries like Japan, Taiwan, Korea, Germany etc. Particularly software imports can be from Europe and raw material from Russia, Czech Republic or Poland. Our members have already started reaching out to other countries for MoUs,” Chugh said.
Chandigarh-based EPC company in the conventional and renewable energy sectors Hartek Group has recently canceled orders to a few Chinese control panel companies and various state utilities that also emphasize shifting away from Chinese equipment. “We back the prime minister’s vocal-for-local call,” company chairman and managing director Hartek Singh said in a statement. “These were approved vendors but we cancelled the orders recently. This may hit 2-3% of our bottomline. Hardships are bound to be there but if we don’t do it now, we will miss the bus. We need to raise our quality standards as this a big opportunity.”
The power ministry ‘s order of 2 July introduced an effective ban on imports from prior-reference countries such as China and Pakistan, which require authorisation. All other imports will be tested in government-approved laboratories.
Cable manufacturer Ravin Cables recently canceled China’s balance order and instead quickly tracked the company’s manufacturing plant in the UAE, said group chairman and managing director Vijay Karia.
“We had imports happening for products not being manufactured here in case of specialised equipment, as customers insist on certain specifications and China has been the cheapest source of the equipment. We would have imported more than Rs 200 crore worth of equipment in the last couple of years from China alone. We have now moved to Korea and European countries like Turkey and Germany. The vocal-for-local and anti-China narrative has gone out very well.”
He said that India needs a long-term approach to favoring local manufacturing and access to low-cost capital.
Deccan Enterprises Managing Director Vikas Jalan said that his company has reduced sales from China and is looking at other countries such as the United States, Germany , Norway, Korea and Japan. “We are already improving local content in our products and have achieved 70 percent of indigenisation. We will accelerate further indigenisation so that we can reach 80 per cent-85 per cent in the next six months to one year, “he said.
For many years, IEEMA has been demanding a ban on imports to protect and promote local industry.
Chugh said that the capacity utilization of the electrical equipment and electronics industry was 70 percent even before Covid 19, which had dropped to less than 50 percent post-pandemic. Of the $10 billion ( Rs 71,000) imports in 2018-19, 30-35% are Chinese, he said adding restrictions on imports from China is justified because of the cyber security angle.
“Lot of software for SCADA and other Smart Grid applications also form part of these imports which is a bigger point of concern as security of our power system gets compromised. Malware and other viruses can play havoc here. While it can destroy the system from remote, it can transfer data from our systems to other countries, jeopardising our energy security and reliability,” he said.
As far as the cost position is concerned, he said that Chinese companies can not be so cheap unless they are artificially subsidized. Indian companies have often defeated Chinese firms in global tenders on the strength of quality , reliability and price competitiveness, he said, “Cost is reality, pricing is political.”
Chugh said the government is working on increasing the facilities for testing the equipment being imported.“If we pool our resources together with capacity available in the private sector, we can expedite testing and ensure higher levels of quality for domestic and global businesses,” he said.
