FM PREPARES GROUND FOR NEW ELECTRONICS POLICY
With an aim to reform the country’s electronics manufacturing sector, Finance Minister Nirmala Sitharaman has introduced revised import duty rates for some key components used in mobile handsets and consumer appliances.
The move comes at a time when the government is finalising a electronics manufacturing policy to boost local production. But it may come with a downside risk of further rise in prices of several products.
In her Budget speech , the minister announced that the government would soon come up with a policy to promote local manufacturing of electronic items. While the fineprint is yet to be finalised, Sitharaman said, “I propose a scheme focused on encouraging manufacture of mobile phones, electronic equipment and semi-conductor packaging.” According to sources, since the discontinuation of the Modified Special Incentive Package Scheme (M-SIPS), which used to primarily drive local manufacturing since 2012, no concrete scheme has been in place to incentivise manufacturers in the sector.
Like M-SIPS, the proposed scheme will offer attractive incentives through tax benefits and easy availability of amenities like electricity and land, to manufacturers, who set up plants in India. The benefit will be for procuring electronic components. It will also be aligned with the revised corporate tax rate of 15 per cent for new manufacturers.
However, the minister proposed increase in Customs duty on items like compressors for ACS and refrigerators (to 12.5 per cent from 10 per cent), printed circuit board
assemblies or PCBAS (to 20 per cent from 10 per cent), display assembly and touch panels for mobiles and on components for electric vehicles (EVS).
Duty on smaller items like motor components used in fully finished air purifiers, washing machines and coolers have been raised to 10 per cent from 7.5 per cent.
The proposed hike in customs duty, just ahead of launch of the new scheme, is a step towards pushing sellers towards local production further. However, lack of a local manufacturing capacity for many of these products at the moment will lead to price rise.
Kamal Nandi, president of Consumer Electronics and Appliances Manufacturers Association (CEAMA) and executive vice-president of Godrej Appliances, said while the intention is good, it will lead to price escalation in the short run, on products like refrigerators, air conditioners, coolers, washing machines, air purifier and chest freezers. Reduction of goods and service tax (GST) rates on ACS and large screen TV sets (from 28 per cent to 18 per cent) will help manufacturers and buyers absorb some of the increase in cost and spur demand. Manish Sharma, president & CEO, Panasonic India & SA, and chairperson of electronics & manufacturing committee of FICCI, said, while promoting local manufacturing is a welcome move, a definitive timeline would have boosted the industry’s sentiments.
Instead of supporting a nascent sector like EVS, increase in import duty on fully finished vehicles and components would not go down well, said Pankaj Tiwari, business head, Nexzu Mobility — a local manufacturer of electric scooters.