Move to protect against cheap imports hurts Electronics Inc

New Delhi: The Centre's move to shield consumers against substandard and cheap imports, especially from China, has had an unintended negative consequence: Supply chain risks for electronics manufacturing and exports.

Aluminium, steel, copper and other high-volume base metals come under the ambit of New Delhi's quality control orders (QCO) covering a large swathe of industries as diverse as automotive and large electrical appliances, which are prone to input-quality risks.

But a small percentage of high-precision, expensive metals and polymers covered under quality control orders are also major inputs into electronics manufacturing, and blanket import curbs are posing sourcing challenges, industry executives said, risking India's export competitiveness vis-a-vis regional rivals in emerging Asia.

"Supply chains are spread across the world, including China, Japan, South Korea", said an executive at a leading global electronics major.

"When a broad-based QCO is implemented on a base metal product like copper or aluminium, the electronics sector also gets unintentionally hurt, leading to supply and sourcing constraints," the executive said. The industry said since electronics products are already covered under the compulsory registration order (CRO) scheme II and undergoes testing and certification, the materials and inputs for making such products ought to be exempt from the QCO curbs.



As per the electronics industry, QCOs serve an important purpose for high-volume-low precision sectors, such as aluminium and steel, which do not require the same standard of refinement as electronics products. Electronics makers require very high-grade raw materials that are both niche and technically complex in nature and, currently, India does not have reliable internal supplies of such raw materials and inputs.

To be sure, QCOs have gained increasing prominence in India that's wary of potential dumping in light of the escalating tariff spat between the two biggest economies on the planet.

PLI RISKS
Another executive said that some of the materials covered by these QCOs are crucial to components and sub-assemblies in the manufacturing of mobile phones and other gadgets being made in India under the production linked incentive (PLI) scheme. "These materials need to be imported to meet high technical standards and precision requirements and are integral to maintaining the high quality of products being manufactured in India," the executive said. The India Cellular and Electronics Association (ICEA), too, has written to the government that the imposition of QCOs could potentially halt manufacturing due to unavailability of inputs. "This would further disrupt supply chains, impede production targets, and hinder the ability of India-made products to integrate into global value chains (GVCs)," ICEA said in its letter to the government, seeking exemptions for electronics products.

Further, an industry executive pointed out, the imports of such materials and inputs were meant for specific purposes and the volume was miniscule as compared with the overall imports of products in categories subject to QCOs.