Indian electrical equipment and electronics industry has begun mass cancellation of orders on Chinese companies in the last few days and are scouting for newer destinations for raw material sourcing.
Companies are cancelling orders mainly for power distribution and transmission gears and turning to other countries despite higher costs.
The process began in May after Prime Minister Narendra Modi’s vocal-for-local call.
This month, the campaign intensified with restrictions on power gear imports but industry wants to make sure that this does not create disruptions.
It also says the country needs to pools its testing facilities across sectors, as there are few in the power sector.
Indian Electrical & Electronics Manufacturers’ Association (IEEMA) president R K Chugh said the industry was till now importing raw material, sub-assemblies and in some cases finished goods too from China.
The association’s director general Sunil Misra said the industry is responding to its call of shifting to alternative sources as it is in their own interest to move out of Chinese supply sooner.
“In the intervening period towards 100 per cent 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 conventional and renewable power sectors Hartek Group recently cancelled orders on a few Chinese companies for control panels and various state utilities also emphasising on shifting away from Chinese equipment.
“We back the prime minister’s vocal-for-local call,” company Chairman and Managing Director Hartek Singh told ET. “These were approved vendors but we cancelled the orders recently. This may hit 2-3 per cent 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 July 2 order has put in place an effective ban on imports from prior-reference countries like China and Pakistan, which require permission. All other imports will be tested at government- approved labs.
Cable manufacturer Ravin Cables recently cancelled a balance order on China and instead fast tracked the company’s manufacturing plant in the UAE, group chairman and managing director Vijay Karia said.
“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 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 India needs a long-term approach to favour local manufacturing and access to low-cost capital.
Deccan Enterprises managing director Vikas Jalan said his company has reduced offtake from China and is looking at other countries like the US, Germany, Norway, S Korea and Japan. “We are already enhancing local content in our products and have reached 70 per cent of indigenisation. We will accelerate further indigensation so that we can reach 80 per cent-85 per cent level in next six months to one year,” he said.
IEEMA has been demanding a ban on imports for many years to protect and promote local industry.
Chugh said the capacity utilisation of the electrical equipment and electronics industry was 70 per cent even before Covid-19, which has dropped to less than 50 per cent post pandemic. Of the $10 billion (Rs 71,000) imports in 2018-19, 30-35 per cent is Chinese, he said adding imposition of restrictions on imports from China is warranted on account of 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 regards cost position, he said Chinese companies cannot be so low priced unless artificially subsidised. Indian companies have many times defeated Chinese firms in global tenders on the strength of quality, reliability and price competitiveness, he said adding “Cost is reality, pricing is political.”
Chugh said the government is working on increasing facilities for testing of 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.