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An Indian Manufacturer Explains How Govts Made Chinese Imports Inevitable

Rajiv Nath, chairman of AiMED, an association of Indian medical equipment manufacturers explains why it's difficult for them to compete with China.
An activist of Gujarat's Karni Sena organisation stands on a poster with the image of Chinese President Xi Jinping and China's flag during an anti-China demonstration in Ahmedabad on June 24, 2020.
SAM PANTHAKY via Getty Images
An activist of Gujarat's Karni Sena organisation stands on a poster with the image of Chinese President Xi Jinping and China's flag during an anti-China demonstration in Ahmedabad on June 24, 2020.

Kolkata, WEST BENGAL — The death of 20 Indian soldiers in a face-off with the People’s Liberation Army has sparked a call to ban Chinese imports. But Rajiv Nath, chairman of AiMED (Association of Indian Medical Device Industry), an umbrella association for manufacturers of medical equipment in India, explains why these boycott calls are likely to go nowhere.

Data shared by AiMED indicates that over 75% of medical items such as clinical thermometers, pregnancy test kits, medical apparel, clothing and accessories and weighing machines sold in India are imported from China. Nath also pointed out at successive governments in India have always given priority to how low the price of a product is while making purchases and approving tenders, making it nearly impossible for Indian manufacturers to compete with Chinese products.

Gestures like deleting Chinese apps from the phone can only be symbolic and Nath’s industry, especially crucial during the ongoing pandemic, is an example of how difficult it is to actually boycott Chinese goods in view of the escalation at the border.

Edited excerpts from the interview:

Could you give us a sense of how much share Chinese imports have in the medical equipment industry in India?

In the year 2019-20 (till March 2020), India is projected to have imported medical equipment worth Rs 4,559.73 crore from China.

During an earlier interaction, you said that when the government began planning around COVID, they reached out to bodies such as FICCI, who wrongly advised them that India doesn’t manufacture many of the necessary goods such as PPE, masks etc. What were the consequences of this?

Bodies like FICCI and CII misled the government during the outbreak of coronavirus and compelled the government of India to reduce duty on import of masks, ventilators and PPE to nil. The import lobby misused COVID crisis as a ploy to take the medical device market in India in its vice-like grip. They as usual back-stabbed on Make in India efforts.

The prices of medical masks, hand sanitisers, PPE kits shot up, the domestic market was flooded with sub-standard and low-quality products as some retailers and unorganised mask manufacturers were cashing in on the virus terror.

AiMED on behalf of the Indian medical devices industry tried to make the government understand that consumers are protected by MRP, not by duties. We will neither allow components to be made in the country nor finished products with this short-cut approach. Had the manufacture of masks and PPEs in India not been battered by low-cost imports from China, the local businesses would have had the profitability to modernise, automate, expand capabilities and capacity to be globally competitive. A robust domestic industry would have been better able to take challenges of imports supply chain disruptions.

FICCI and CII, in the greater interest of the country, should have also asked for MRP of masks and PPE to be capped. But only AiMeD from the beginning has been asking for prices of all devices to be regulated by capping trade margin over import landed price or MRP to be capped and even now AiMeD manufacturers and dealers are asking for MRP of N95 masks to be capped.

The importers’ lobby is least concerned about making healthcare affordable for Indian consumers and Indian medical device industry or about job losses of skilled and unskilled workers but thinks only about protecting their own profits.

In your estimate, how much has the government imported in terms of PPEs and other equipment from China during the ongoing crisis? And in comparison, how much was made and sold by Indian manufacturers?

MOH&FW via HLL has placed order with 10 suppliers for N95 Masks for 271.98 lakh and we are informed that as on 16th June, they received stocks of 142 lakh. The MOH&FW / HLL are currently sourcing over 4 lakh pieces of PPE coveralls daily and 2 lakh pieces of N-95 / IS 9473 FFP2 masks daily from China, resulting in a shortfall of over 2 lakh pieces daily of N-95 / FFP2.
Based on data available with AiMeD, seven Indian manufacturers revealed that they have 70 million pieces of unsold N95 masks lying with them.

Why is it difficult for Indian medical equipment manufacturers to compete with Chinese imports usually?

To promote the domestic medical device industry that will subsequently reduce India’s heavy reliance on imports, the current basic import tariff of 0-7.5% needs to be over 15% for medical devices (the bound rate under WTO is 40% duty). The concessional duty on raw material may be retained at 2.5% for now, for the next 3 years. After GST, imported devices are cheaper by 11% and at times we are unable to compete with Chinese imports in government tenders. In other countries like Iran, as soon as a factory is put up, they support the domestic product with import restrictions and duty protection.

Most domestic manufacturers in the Rs 1.05 lakh crore medical devices industry (at patient level selling price) were facing closure since they could not compete with China and imports from other countries. Though India has an estimated 900-1,000 domestic medical device manufacturers, only 15 companies have a turnover of above Rs 200 crore. Of the Rs 38,837 crore imports in 2018-19, 66%, or Rs 25,624 crore worth of medical devices, were in the electronics and equipment, a lion’s share belonging to multinational companies.

The government was supposed to focus on Make in India, but then why is this industry still struggling against Chinese imports?

Despite all the right intentions and sound-bytes from the government to reduce import dependence on China and boost domestic manufacturing, medical device manufacturing within the country is not picking up and the industry is still struggling against Chinese imports. The weakness of India’s healthcare security and of Indian medical system was exposed to all when imports got disrupted from China for over two months in February and March. Had the Indian medical device industry been stronger and robust and better protected, manufacturers of masks and PPE kits would have been more modernised, more automated and better placed to ramp up capacities to feed India and even other countries.

We further await policy announcement on the below vital issues of Indian Medical Devices Industry to end the import dependence forced upon us :

• Government must ensure consumers are not hurt by shortages by monitoring of prices at import or at ex factory level and of the MRP and proactive steps taken to regulate prices but not overly so that it leads to further shortages and become non remunerative for manufacturers and traders.

• Need to regulate all Medical Devices under a Patients’ Safety Medical Devices Law separate from Drugs to protect patients and aid responsible manufacturing.

• Restriction on Import of Pre-owned Medical Equipment

• While we thank the government for deploying 5% cess on some imported devices to encourage employment and Make in India of some medical devices, to address 70-90% import dependency we seek this cess to be applied to other medical devices too and a predictive nominal tariff protection policy as done for mobile phones to ensure a vibrant domestic industry and competitiveness and price stability driven by competing domestic players

• Need to incentivise quality and domestic content in healthcare products in public healthcare procurements by preferential pricing for Q1 e.g. ICMED (QCI’s Indian Certification for Medical Devices) instead of L1 (lowest price) to ensure patients access acceptable quality.

When India was struggling with lack of PPEs and Indian manufacturers were having a tough time making them during the lockdown, there were reports that the government had ordered the material from China.

We are not against imports. We ourselves told the government the capacity limitations and to arrange imports of PPE till Indian manufacturing gears up but that doesn’t mean that imports should come in to undermine ‘Make in India’ efforts.

But we were disheartened to know that the government will be reducing duty on import of masks, ventilators and PPE to zero and it was already nil for gloves. Consumers are protected by labeled MRP or by capped MRP, not by duties, but the government fails to realise that. We cautioned the government about the harmful effects of duty-free imports.

Ironically, if one imports gloves from Malaysia the duty is zero but if anyone buys from a glove factory in Indian SEZ it’s 11% duty! Why doesn’t the government reduce the duty on gloves to zero from SEZ too, to level the playing field for glove manufacturers in India?

We suggested to the government that India should take cue from Japan. Like the Japanese government has announced a package of $2.2 billion for Japanese industries to relocate their plants from China to Japan and $200 million to other countries outside of Japan to maintain their healthcare security.

In the midst of the pandemic, as coronavirus cases rise, do you think India is in a position to stop all imports and cancel orders placed to Chinese companies, say, in a few days?

Yes. The capacity of PPE coveralls has gone up from 62.4 lakh pieces per annum to 25.88 crore pieces per annum from the 136 Manufacturers listed with AiMeD. There may be others too. Similarly, for masks, from 30 crore pieces per annum, manufacturing capacity has gone up to 219.8 crores pieces per annum.

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This article exists as part of the online archive for HuffPost India, which closed in 2020. Some features are no longer enabled. If you have questions or concerns about this article, please contact indiasupport@huffpost.com.