Ellora Time's Manufacturing Woes

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Themes: Production management/ manufacturing
Period : 1991 - 2002
Organization : Ellora Time Pvt. Ltd. (Ellora)
Pub Date : 2002
Countries : India
Industry : Manufacturing

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Case Code : OPER013
Case Length : 10 Pages
Price: Rs. 300;

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The China Story Contd...

Explaining the rationale for this, T K Bhaumik, Senior Adviser (Policy), CII, said, "The philosophy of a Chinese manufacturer is simple. It won't claim to sell you the best quality product, but it will charge you a tenth of the price offered by others. Maximization of sales is more important for a Chinese manufacturer than profit maximization."

According to analysts, despite the fact that Indian manufacturers were continually protesting against the dumping¹ of goods by China, the Finance and Commerce Ministries seemed to be rather lax about the issue. However, the Confederation of Indian Industry (CII²) set up a committee to track Chinese imports. In late 2000, the Federation of Indian Chambers of Commerce and Industry (FICCI³) announced its decision to set up a task force to examine the impact of growing imports from China. FICCI agreed that various sectors of Indian industry were facing a major threat from cheap Chinese imports. Since China was not a part of the WTO, there was no transparency in its accounting systems. Thus, it was very difficult to ascertain the input costs and claim that Chinese exports amount to dumping.

In 2001, the government finally initiated anti-dumping investigations against Chinese toys, sport goods and batteries, in response to the protests. Government agencies confiscated Chinese goods and the finance ministry unilaterally imposed higher import duties if the certificate of origin of the goods was China.

It was also made mandatory for 131 imported products to strictly follow the BIS⁴ specifications and packing instructions including the printer's name, prices and other such details, before they were sold in India. However, according to analysts, these non-tariff barriers⁵ would not be very effective in protecting the domestic industry because the government still would not be able to prove dumping. This was because it was difficult to establish that the imports had been made below the normal value and that they were dampening the prospects of the domestic industry.

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1] Dumping refers to the selling of a product in a destination market at a price that is less than what the product is sold for in the country of origin. It can also mean that a product is sold at destination for less than its production costs. Usually, cheap, inferior goods are dumped in a foreign market either to reduce unwanted stock or to damage the foreign competitor's market.
2] CII is a non-government, not-for-profit, industry-led and industry managed organization, partnering the industry and government alike through advisory and consultative services.
3] FICCI is a representative body of Indian companies that looks after the interests of corporates and strives to integrate the Indian economy with the global mainstream.
4] Bureau of Indian Standards (BIS) is the National Standards Body of India looking after all matters concerning Standardization, Certification and Quality.
5] Non-tariff barriers are obstacles imposed on imports other than tariffs and quotas. They include all types of standards and regulations to which imports must conform e.g. product safety. They add cost to the imports and provide advantage to domestically produced good and services.