Coronavirus impact: Firms stare at prospect of airlifting raw materials

The growing spread of coronavirus and its impact on production in China have left Indian companies scrambling for options. While airlifting raw materials from China is a measure that some firms are now considering, others are looking at neighbouring countries such as Taiwan, Vietnam, and Thailand for their sourcing requirements.

Categories where the pressure is felt the most include electronics, apparels, auto, and pharmaceuticals. Almost 70 per cent of pharma raw material comes from China. And 18 per cent of automobile components, 30 per cent of tyres, and 45 per cent of completely built units of consumer durables are imported from China, said CRISIL in a recent report.

Kamal Nandi, business head and executive vice-president, Godrej Appliances, said makers of durables had supplies in place till the end of March. But April will bring in new challenges as supplies will run out by then for most majors.

“From April onwards, companies would have to airlift supplies if production in China is not restored,” he said. “The logistical cost would escalate to 2-3 per cent, which would have to be passed on to the consumer,” he said.

Compressors for air-conditioners, flat panels for television sets, and mobile phone parts are imported from China. Industry sources said manufacturers had given their list to the government regarding components that would need to be airlifted from China in the coming weeks.

Sivaramakrishnan Ganapathi, managing director of India’s largest apparel exporter, Gokaldas Exports, said: “We do a lot of imports. We have materials to see us out till April. Some factories in China have begun operations and they will be pushing their goods now. But if they miss the supply deadline, they will allow us to airlift raw materials without us having to bear the cost for it.”

One of the largest carmakers in the country has begun airlifting components from China. While the freight cost will shoot up significantly as a result, the company, said sources, is prepared to take the hit to ensure domestic production does not suffer.

Pharma industry officials said the aerial route was the best option available to companies right now, given the congestion at Chinese ports.

Sudarshan Jain, secretary general of the Indian Pharmaceutical Alliance (IPA), said a task force formed by the health ministry was coordinating with the commerce ministry.

“The government has assured us of any help required to help import raw material through the aerial route if necessary. This would be a faster process than the sea route,” he said.

At least two multinational companies confirmed to Business Standard that their global offices were looking at supply chain issues and how raw materials could be transported quickly to India from China.