India is readying to protect its domestic manufacturers from Chinese products swamping the market, despite the danger of WTO rules looming large. The move, however, courts the danger of other countries dragging India to WTO terming the favours granted as unfair trade practices under the international agreement.
Three Central ministries - Telecom, Heavy Industries and Renewable Energy - would soon have policies to protect domestic producers from the increasing penetration of foreign manufacturers especially in the form of cheaper equipment from China.
These three sectors contribute to around 1/3 of annual manufacturing output in terms of money but their growth has slowed down in the recent years, with many players opting for cheaper and less reliable Chinese goods, thereby making the market unprofitable for domestic manufacturers.
“The Bharat Heavy Industries Limited has already manufactured equipment required to generate power in the 12th plan. We have expanded facilities to meet the target of the 13th five year plan also. But, the buyers are opting for cheaper Chinese power generation equipment and we are helpless,” said a senior official of the ministry of heavy industries.
This has prompted heavy industries minister Praful Patel to urge Prime Minister Manmohan Singh this week to take a policy initiative which would protect the domestic manufacturers. He suggested incentives or mandatory sourcing of certain amount of equipment from the manufacturers as a part of the policy. The ministry also wants higher duty on power equipment imported from China.
The Telecom Ministry is working on the guidelines of making, minimum procurement of 20% of equipment from domestic manufacturers, mandatory for all telecom companies in a bid to revive the sagging telecom manufacturing industry. The reason for plight here is also same - cheaper Chinese equipment which has flooded the market.
There is already a policy in place for public sector bodies prescribing procurement of certain amount of equipment from domestic players. Now, the ministry has formed guidelines to extend a similar policy framework for the private sector, a move opposed by certain foreign companies. A ministry committee has already identified 18 hardware items including sim-cards and modems to be mandatory procured from domestic players.
Another emerging sector in India, solar energy, is also facing the Chinese heat. Almost 60% of solar goods sold in India are from the northern neighbour even though they are extremely low on efficiency.
The Ministry of new and renewable energy in its draft policy document for Jawaharlal Nehru Solar Mission (JNSM) has provided a provision that certain amount of solar energy under phase-II of the mission will be manufactured only from home produced equipment.
The government is keen to provide the protection as zero growth in domestic manufacturing sector was one of the reasons for economic slowdown in the last financial year which was the year the growth rate stagnated at 5%.
The move, however, is laced with the danger of other countries dragging India to WTO terming the favours granted to domestic industry as unfair trade practice under the international agreement.