Delay in access to electronics and allied component from China due to closer inspection by customs officials in India would mean drying up of product inventory and a possibility of further price increase in appliances.
After the India-China stand-off at Galwan Valley resulted in the killing of 20 Indian soldiers on June 18, the customs department is closely scrutinising all imports to Mumbai and Chennai. With this, electronics makers relying on imports of finished products and components from China are expecting production delays, with threats of slipping into a ‘red zone’ looming large.
This could see electronics inventory levels drying up over the next month. Sources told Moneycontrol that the inventory levels of several smartphone and television brands may last only for less than a month.
Appliance makers told Moneycontrol that even though there is no central government order, the customs department has been thoroughly inspecting finished electronics products and components from China since June 21. Earlier, only suspected packages from countries like China were held back by the customs department.
“There is a delay in getting components and crucial parts into factories since the consignments are stuck at ports and airports. Though from June 25, the situation has seen a partial improvement, the delay will continue,” said the chief executive of an appliance maker.
Even though a majority of appliance companies manufacture products in India, key components like panels for LED televisions, air compressors for air-conditioners and refrigerators as well as hydraulic motors for cooling are imported from countries like China.
Due to the Coronavirus outbreak and a 77-day lockdown in Wuhan, China, imports had been heavily hit since January 2020.
“By April, the Wuhan lockdown had ended. However, transport curbs in India meant that it was almost impossible to get consignments scheduled earlier in 2020 to be delivered. Cargo aircraft have also been primarily used for transporting PPE kits and other medical devices for COVID-19,” said the head of home appliances at an electronics maker.
Industry sources fear that if the customs scrutiny issue is not resolved within 10-15 days, appliance makers would be forced to hike prices for the third time in a row in 2020.
They have already increased product prices by 5 percent in February/March, after COVID-19-related lockdown forced factories in China to shut down. This halted the supply of key components to Indian factories. A second hike of 3-5 percent was implemented in April/May after manufacturing failed to take off.
Now, while production facilities have resumed operations across India, shortage of labour due to workers going back home and delay in raw material deliveries could mean another round of price increase.
China, which was the epicentre of the COVID-19 outbreak, is a major exporter, accounting for almost 23 percent of global electronic goods.
In India, the Make-in-India initiatives for key components like compressors and smartphone chipsets have not yet taken off. Hence, the production of a finished good is dependent on imports from China.
The electronics industry in India is already said to have taken a Rs 9,500 crore-10,000 crore hit due to the production halt amidst the nationwide lockdown from March 25. Now, the industry is awaiting an official stance on future imports from China.It is expected that the thrust will be to minimise all component imports and restrict only those products which have no production capacity in India right now.