Will the hike in cus­tom duty in­crease lo­cal man­u­fac­tur­ing?

Christ­mas ar­rived early for the In­dian elec­tron­ics in­dus­try as the fi­nance min­istry played the per­fect Santa by hik­ing ba­sic cus­toms duty (BCD) on a few con­sumer elec­tron­ics prod­ucts of mass con­sump­tion. These in­clude TV sets, set­top boxes, CCTV equip­ment

Electronics Bazaar - - Front Page - By Abid Hasan

The Elec­tronic In­dus­tries As­so­ci­a­tion of In­dia (ELCINA) has wel­comed the an­nounce­ment from the Min­istry of Fi­nance to raise ba­sic cus­toms duty (BCD) on a few pop­u­lar con­sumer elec­tron­ics prod­ucts, re­as­sured that this move un­der­lines the gov­ern­ment’s com­mit­ment to pro­mot­ing lo­cal man­u­fac­tur­ing in the elec­tron­ics sec­tor. “But the catch here is that we need to guard against the ex­ist­ing Free Trade Agree­ments (FTAs) be­ing mis­used to evade this in­creased BCD, which will en­able the im­port of these prod­ucts to con­tinue,” says Ra­joo Goel, sec­re­tary gen­eral, ELCINA.

Ac­cord­ing to Goel, the main chal­lenge is in the case of set-top boxes (STBs), which are in­cluded in the As­so­ci­a­tion of South East Asian Na­tions’ (ASEAN) FTA. Due to the threat of FTAs, the elec­tron­ics in­dus­try has made a strong plea to the gov­ern­ment to ex­clude elec­tron­ics from the RCEP (Regional Com­pre­hen­sive Eco­nomic Part­ner­ship), which is a mega FTA be­tween ASEAN and six other coun­tries, in­clud­ing China and In­dia.

Goel adds that the next step to­wards pro­mot­ing higher value ad­di­tion in the In­dian EMS sec­tor is to dis­cour­age the im­port of pop­u­lated PCBs. There­fore, ELCINA has rec­om­mended that all pop­u­lated printed cir­cuit boards (PCBs) should be sub­jected to the same BCD as that charged on the fin­ished equip­ment they are meant for. This will pro­mote elec­tron­ics man­u­fac­tur­ing ser­vices (EMS) and drive de­mand for lo­cal com­po­nents, cre­at­ing huge em­ploy­ment op­por­tu­ni­ties in the elec­tron­ics man­u­fac­tur­ing sec­tor.

Goel con­cludes by say­ing, “The in­dus­try must not suc­cumb to the temp­ta­tion of rais­ing the prices of these prod­ucts, but should in­vest

in ad­di­tional man­u­fac­tur­ing ca­pac­i­ties to in­crease value ad­di­tion and be­come glob­ally com­pet­i­tive.”

Talk­ing to Elec­tron­ics Bazaar on the con­di­tion of anonymity, a se­nior mem­ber of the Min­istry of Elec­tron­ics and In­for­ma­tion Technology (MeitY) says, “In the elec­tron­ics sec­tor, once you have large scale man­u­fac­tur­ing, you can pro­duce cheaper goods but right now, that scale has not been achieved, so the cost of pro­duc­tion is high. If we give man­u­fac­tur­ers pro­tec­tion for a few years, the scale of pro­duc­tion could go up. We are see­ing trac­tion and huge de­mand, which will help the in­dus­try to scale up in lo­cal man­u­fac­tur­ing.”

A shot in the arm for lo­cal man­u­fac­tur­ing

On the road to­wards large scale lo­cal man­u­fac­tur­ing, the dis­tance to be cov­ered is very long, but the jour­ney be­gins with this first step of in­creas­ing the BCD, feel the man­u­fac­tur­ers. The cus­tom du­ties, GST and the up­com­ing Bud­get can pro­vide the strong push needed to strengthen the mar­ket and make it more or­gan­ised.

The pres­i­dent of the Elec­tric Lamp and Com­po­nent Man­u­fac­tur­ers As­so­ci­a­tion of In­dia (ELCOMA), Shyam Su­jan points out that the LED busi­ness in In­dia has al­ready crossed a turnover of around US$ 2 bil­lion; he ex­pects this fig­ure to cross US$ 4 bil­lion by 2020.

Su­jan says, “That’s the kind of am­bi­tious jump we want to achieve. So far, our plans are as per the pro­jec­tions that we have made. Even as we de­mand lower GST, we are happy with the present tax­a­tion sys­tem.”

There is a sense that the LED and set-top box sec­tors will wit­ness the biggest boom be­cause of the ex­ten­sive de­mand for these prod­ucts in the mar­ket. For the last six years, the gov­ern­ment of In­dia has been pro­mot­ing the digi­ti­sa­tion of ca­ble tele­vi­sion and the use of LED lights, so there is no stop­ping growth in these sec­tors. It may be re­called that in March 2013, the gov­ern­ment had raised the im­port duty on STBs to boost lo­cal man­u­fac­tur­ing. And re­cently, the gov­ern­ment re­peated the move in a fresh bid to boost do­mes­tic pro­duc­tion of STBs by in­creas­ing the im­port duty to 20 per cent.

Lo­cal man­u­fac­tur­ers are also ex­pect­ing favourable an­nounce­ments for the elec­tron­ics in­dus­try in the up­com­ing Union Bud­get, which can give a ma­jor push to do­mes­tic man­u­fac­tur­ing across the coun­try.

Ash­wini Ag­gar­wal, pres­i­dent of In­dia Elec­tron­ics and Semi­con­duc­tor As­so­ci­a­tion (IESA), says, “This is a clear mes­sage to the lo­cal in­dus­try that the gov­ern­ment is sup­port­ing it. The no­ti­fi­ca­tion is well-timed and will be re­ceived very well by the in­dus­try.”

Ag­gar­wal ex­plains that this move of the gov­ern­ment is a change in mind­set. He says that the gov­ern­ment is break­ing out of its ear­lier mind­set of mak­ing just a token ad­just­ment to the du­ties, and is try­ing to ra­tio­nalise them as re­quired by the In­dian mar­ket­place. If this move im­pacts some of the most de­mand-in­ten­sive sec­tors of the na­tion, the re­sult will be far reach­ing.

When asked if it’s the first step to ful­fill­ing the dream of ex­ten­sive lo­cal man­u­fac­tur­ing, Ag­gar­wal replied, “This is a tip­ping point.”

Man­u­fac­tur­ing op­por­tu­ni­ties ahead

Pankaj Gu­lati, pres­i­dent, ELCINA, shares that this no­ti­fi­ca­tion is def­i­nitely go­ing to im­pact the in­dus­try, es­pe­cially the EMS sec­tor, and boost lo­cal man­u­fac­tur­ing. Set-top boxes, LED lights, en­ergy me­ters and flat panel dis­plays will wit­ness the biggest boom.

Gu­lati also men­tions that de­vel­op­ments will oc­cur in phases for now. In the first phase, more EMS firms will bring out as­sem­blies of prod­ucts. In the sec­ond phase, lo­cal pro­cure­ment of base level com­po­nents will start.

Man­ish Sharma, pres­i­dent, Con­sumer Elec­tron­ics and Ap­pli­ances Man­u­fac­tur­ing As­so­ci­a­tion (CEAMA), thinks that this hike in the im­port duty will not lead to ma­jor price hikes be­cause the duty struc­ture for lo­cal man­u­fac­tur­ing re­mains un­changed. But it’ll cre­ate a good num­ber of job op­por­tu­ni­ties and en­hance do­mes­tic man­u­fac­tur­ing.

As of now, while widespread lo­cal man­u­fac­tur­ing still seems dis­tant, it looks like a new path has been carved out to achieve this goal. The im­me­di­ate im­pact of the higher im­port duty, how­ever, has been an in­crease in the price of some mo­bile phones and tele­vi­sion sets. Go­ing for­ward, things will set­tle down, but price hikes have been wit­nessed in De­cem­ber 2017, par­tic­u­larly in the con­sumer elec­tron­ics mar­ket.

ash­wini aG­GaR­wal, pres­i­dent of In­dia Elec­tron­ics and Semi­con­duc­tor As­so­ci­a­tion (IESA)

Ra­joo Goel, sec­re­tary gen­eral, ELCINA

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.