New Delhi, Oct 18 (FN Agency) Chinese companies have started backing out from supply contracts, citing sharp rise in input costs and frequent power cuts in their factories, threatening production disruptions in India. An industry source told UNI that the Chinese firms have been invoking force majeure clauses in the last one week or so, leaving Indian buyers high and dry. Invoking force majeure means suppliers are not liable to ship their consignment and, therefore, deals would be cancelled, a Gujarat-based importer said.
“Thank you very much for your long-term support….Government began to limit power supplies in mid-September and the company was faced with force majeure such as frequent shutdown of production facilities and thus sharp decline in finished product output,” the importer read out the mail from his Chinese supplier. “Therefore, it has been decided to terminate the original contract. In view of the recent doubling of the prices of main raw materials of our finished products, the price of finished products will be raised two times or three times,” he told UNI quoting the email. The Gujarat-based firm did not wish to be named, saying it does not want to create panic when the demand-supply gap is already widening. Neeraj Kedia, Chairman of Muzaffarnagar-based Chakradhar Chemicals, said he had seen some delays in import of key inputs from China with the supplier citing a government order which awaits clarity in interpretation.
“Our production has not been affected as of now but given the situation, we see it getting impacted in coming times,” Kedia said. He noted that there had been a 300 per cent rise in prices of yellow phosphorus imported from China while prices of zinc had climbed nearly 30 per cent. Federation of Indian Micro and Small & Medium Enterprises (FISME) Secretary General Anil Bhardwaj said prices of both inputs and outputs had gone up for a number of reasons such as soaring freight charges and supply constraints. “Government should acknowledge that there is a huge supply chain problem internationally and identify areas where it can intervene either in terms of cash investment or facilitating access to technology,” he said.