manufacturing costs and taxation- related issues . This also is |
blended cost of power ( which takes the cost of alternative |
|
leading to reduced utilization of existing manufacturing |
sources , back up , etc ., into account ) in India is 2 – 2.5 times |
|
capacity . |
higher ( depending on the duration of use of alternative power |
|
It has also been observed that there is little product / subassembly-level |
sources ) than in other low-cost manufacturing countries . |
|
design-related activity taking place in the |
Although the cost of grid power has been on the rise in recent |
|
country , especially in consumer electronics . The reason for this |
years in certain parts of the country , the major concern for |
|
is the absence of an incentive to design such products in India , |
manufacturers relates to the quality of grid power . This |
|
since there is very little scope of such designs being |
includes reliability of its supply , frequency , duration of |
|
manufactured indigenously due to the lack of a component |
unannounced and announced power-cuts , etc . This issue has |
|
ecosystem , high manufacturing costs and taxation-related |
been observed across various states , although with varying |
|
issues prevalent in the country . |
intensity . Manufacturers have made arrangements for |
|
The material for products or sub-assemblies that are currently |
alternative sources of power ( such as DG sets ) and UPS |
|
manufactured in India is also largely imported . This further |
equipment ( for uninterrupted supply ) due to the unreliability of |
|
indicates the lack of a component ecosystem in India . |
grid power . These arrangements involve large fixed and |
|
Countries such as China manufacture most of the required |
variable costs , which increase the overall cost of power . |
|
components indigenously on a large scale , while a strong and |
Although the cost of real estate varies , depending on the |
|
complete component-manufacturing ecosystem is lacking in |
location of the facility , it has been observed that the cost of |
|
India . |
real estate in India is higher in general than comparable |
|
Secondly , the high cost of manufacturing components |
locations in other low-cost manufacturing countries . |
|
domestically due to various reasons , including lack of scale , an |
As mentioned earlier , interest rates in India are higher as |
|
inverted duty structure on manufacture of components , |
compared to other low-cost manufacturing countries . |
|
environmental factors such as high electricity and real estate |
Therefore , even if capital expenses are assumed to be similar in |
|
costs , etc ., leads to the price of domestic components being |
India and other countries , the difference in cost of financing |
|
higher in India than in some low-cost manufacturing |
results in disability . |
|
destinations like China . |
The disability on account of high cost of manufacturing is |
|
As the manufacturers of sub-assemblies / products in India are |
1.2 %. |
|
forced to import components from various locations in China |
Perception of India as electronic manufacturing destination |
|
and South-East Asia due to the lack of a complete component |
Since perception of India as an electronic manufacturing |
|
ecosystem in the country , it gives rise to many supply chain- |
destination is not as high as other low cost manufacturing |
|
related uncertainties . The suppliers are located in various |
destinations , greater efforts have to be made by domestic |
|
geographic locations . Added to this is the problem of long |
manufacturers towards branding and promotion . This results in |
|
shipment time and customs clearances . As a result , the |
higher costs and thus a disability to the extent of 1 % |
|
manufacturers need to maintain large raw material inventories .
Long-duration inventory norms , combined with high interest rates on working capital , result in raised inventory-carrying costs , which are negligible in other low-cost manufacturing
|
Total disability
The total disability burden that the Indian IT electronics sector has to bear is 15.87 %.
|
|
countries due to most of the components being locally available and interest rates being lower in them .
Shipping components from various geographic locations also results in increased freight costs .
|
Nature of disability
Taxation related disability
Business environment disability
Total Disability
|
Burden
6.47 %
9.40 %
15.87 %
|
The disability on account of inadequate availability of components and related issues is 4.6 %. |
In estimating the disabilities , certain assumptions were made , which are listed at Annexure B . |
|
High cost of manufacturing due to high power costs , real estate costs , | ||
etc . |
To enable the sector to grow , it is important to provide an effective |
|
The cost of manufacturing / conversion costs is higher in India |
electronics manufacturing ecosystem and remove the hindrances to |
|
as compared to those in other low cost manufacturing |
investment in this sector . |
|
countries . | ||
Issues related to supply of power are rated the highest by | ||
manufacturers among all infrastructure- related issues . The |