Revive PSUs to Forestall Chinese Imports: Sharma.

To reduce Indian manufacturing’s increasing dependency on China, Commerce and Industry Minister Anand Sharma has asked Prime Minister Manmohan Singh to inject funds into the specified public sector undertakings to enable it develop capabilities and competitiveness in producing intermediary goods.

China accounts for almost 26 per cent of India’s manufacturing GDP, prodding the department of commerce to strategise and develop strong defences in the sector. Officials in the department of commerce told The Indian Express that Sharma has taken up the issue with the Prime Minister given its aggressive pricing in the telecom and power equipment market and also its slow capture of markets in sub-sectors within pharmaceutical.

These issues have become important in the wake of rising trade deficit between India and China. In 2010-11, it touched $20 billion. It is expected to quadruple to $80 billion by 2017.

The most vulnerable, according to officials, is the Indian pharmaceuticals industry, given its strong dependence on Chinese intermediary goods (goods which are used as input in production of other goods) like basic chemicals and Active Pharma Ingredients (API) required for making a drug. An API molecule is one that is biologically active and has curative properties.

From being a leading manufacturer of basic chemicals and APIs, India lost its edge to China given the high cost involved in the process. The commerce minister has suggested that “PSUs should be revived by making large investments in them so that they start making such goods in the country itself. He also suggested that as a part of the two-pronged strategy, a financial instrument/mechanism should be devised whereby more financial resources can be provided to the private sector also,” an official said.

At present, Indian Drug and Pharmaceutical Ltd (IDPL) and Hindustan Antibiotics Ltd are the two state-run companies manufacturing such basic products. However, the two companies have lost the competition long back to the Chinese companies.

According to industry experts, production in the pharma sector requires massive research and huge investment but banks don’t provide such huge amounts for it because the work involved is intangible and too risky. Also, going forward, focus is likely to shift to bio-chemical research, which is more expensive than chemical. “Similar request have been made for the PSUs in the power sector, telecom sector and IT sector,” the official said.

Indian power generation companies like Reliance Power, Adani Group, Tata Power are heavily dependent on China for sourcing power generation equipment. State-run BHEL manufactures equipment that can generate 15,000 MW of power. Although, it is planning to scale it up to 20,000 MW by March 2012, it will still not be able to match the target set by the power ministry — 1,00,000 MW power generation — in the 12th Five Year Plan. Therefore, private firms have started looking at other countries for getting the equipment.

In the telecom sector, companies such as Bharti Airtel are sourcing 3G equipment from China. This is when ITI, a PSU manufactures a whole spectrum of equipment including switching, transmission, access and subscriber premises.

Source : indianexpress.com