Export logjam: In race against China, power equipment makers seek govt help

The first of a three-part series looks at how India's high-value power equipment exports to China have been hit by bureaucratic hurdles

An Indian electric equipment maker recently spent six months translating from Mandarin to English all the documents and allied rules, laws and regulations of a tender floated by the State Grid Corporation Limited of China.

“We realised that none of the conditions favoured our participation. Our request for a translated copy of the tender fell on deaf ears. Moreover, if I was eligible under one criterion, I wasn’t meeting the sub-criteria. It’s a mesh of rules to prevent Indian companies from entering the Chinese market while they continue to flood our market,” said a senior executive of the company mentioned above. 

At a time when global trade growth remains slow, exports from India face restrictions in the form of harsher sanitary and phytosanitary rules, stricter standards, labelling requirements and import controls in key markets. 

Reacting to complaints from exporters, the Union Commerce Department has asked industry bodies to map out the problems being faced by the entire value chain of a product, such as inverted duties, dumping or unfair subsidies.

In response, the Indian Electrical and Electronics Manufacturing Association (IEEMA), the representative body for the industry, has submitted a note to the Piyush Goyal-led department on the non-tariff barriers they face in the countries they export to. The biggest complaints are against China. Business Standard has accessed the note and a copy of a tender floated by the State Grid Corporation Limited of China.

The concerns of the domestic industry are not unjustified. Manufacturers say that Chinese imports in power, renewable and electric equipment sectors have flooded the Indian market because of lax rules, which they feel should be addressed. As Chinese exporters get sovereign support in the form of preferential tenders, Indian companies say the same should be done in India, too.

The estimated market size of India’s electrical industry is Rs 2.08 lakh crore. In 2018-19, exports of IEEMA’s member companies stood at Rs 21,235 crore, most of which was to China, Japan, Korea, the US, Russia and European countries such as Germany, France and Italy. As for China, it is the world’s largest producer and exporter of electrical machinery, and accounted for more than a fifth of the total global electrical exports in 2016.
 

IEEMA has listed several issues with the tenders floated by Chinese state-owned power companies for procuring equipment. One of the main grievances is that the tender is always in Mandarin and no copy is available in English, even on request. “This makes it difficult for us to understand the fine print and terms and conditions. Moreover, the terms are so strenuous that it is difficult for Indian companies to participate,” said an industry executive.

China’s tender specifications mandate that participating companies be legally registered in that country. Bids placed through a joint venture with a Chinese company or through an agency tenderer are not accepted. Yet, as IEEMA points out, these are allowed in India and other countries, and are used by foreign companies to access the local market. 

“Electrical machinery provided the initial impetus to Chinese exports post the country joining the World Trade Organization in 2000. As a result, the firms in the sector enjoy special privileges from their government in the form of tax rebates and political patronage,” said a senior official who has worked on Chinese trade flows. 

“There is a chance that more non-tariff barriers may be deployed by China now that the Regional Comprehensive Economic Partnership deal has gone sour. The mega trade deal would have allowed China a much larger market access to India,” said trade expert and Jawaharlal Nehru University professor Biswajit Dhar. China could be sending a message to New Delhi, apart from protecting its own market, he added. 

China also mandates that foreign manufacturers get a quality certificate from it. Industry executives say this is an impossible exercise in the case of 90 per cent of the equipment, as they cannot be physically carried to China. “Due to the language barrier, cumbersome procedures, the time and cost involved, it becomes next to impossible for Indian industry to take the CCC (China Compulsory Certification),” said the note.

IEEMA has also complained that China does not recognise quality certificates issued by the Central Power Research Institute (CPRI), a body under the ministry of power. But it is not only China — more than 30 countries do not recognise CPRI as a testing agency and ask for quality certificates from international laboratories outside India. These include Oman, Mexico, Malaysia, Argentina, Kuwait, United Arab Emirates and even neighbours Bangladesh, Nepal and Sri Lanka. 

The industry body has requested the commerce ministry to make certification by Indian agencies compulsory for imports into India. “IEEMA requests mandatory third party testing requirements and Bureau of Indian Standards (BIS) certification while importing electrical products from these countries as a reciprocal measure,” said the note.

The Directorate General of Foreign Trade is expected to take up the issues with its Chinese counterpart soon, a senior official said.