In June 2011, a consignment of about 4,000 AKAI television sets was confiscated at a Chinese port. The problem with the cathode ray tube (CRT) television sets scheduled to be shipped to India was that those were actually not manufactured by AKAI.
The counterfeit sets, in fact, were caught by the management of AKAI's India operations based on a tip-off. "We took the necessary action," says Pranay Dhabhai, managing director, AKAI India. "And, this was not repeated." The electronics firm imports all its products for the Indian market from China.
In a slowing Indian market, where intense competition is already squeezing margins, this was evidence of another pressure that consumer electronics firms are dealing with, though few are willing to talk about it on the record. Queries sent to Korean electronics firm LG and white goods major Whirlpool were not answered.
There's more. It's not just counterfeits, that is exact replicas of existing products, but also a booming grey market - products smuggled and sold without paying taxes - that together constitute at least 15 per cent of India's consumer electronics segment, analysts indicate. And, the numbers are growing steadily.
On top of this, companies such as Samsung admit they are "grappling" with controlling parallel imports of high-end television sets, brought into the country mainly from southeast Asia, which could be 10-15 per cent of the flat panel TV market in India. Parallel imports are genuine trademarked goods purchased abroad and resold in the domestic market.
"China is not the only place where counterfeits come from," says Krunal Mehta, vice-president, Angel Broking. "In the last 12 months, government authorities have conducted raids on dealers and godowns with fake consumer electronics in north India."
The majority of fakes in the market today are TVs and fridges in which brand-new compressors are replaced with older or locally made ones. A number of counterfeit factories and godowns are present in the National Capital Region, say analysts, which continue to operate despite occasional police raids, and supply mostly to the north Indian market. Electronics firms, as a result, are now pressuring the government to not only increase vigilance domestically but also tighten customs to stop fake and grey market imports.
Customs are crucial because the parallel supply chain often works in collusion with government authorities at ports. Without this, analysts assert, products shipped from manufacturing centres like China's south-eastern
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