SPOTLIGHT ON INDIAN ELECTRONICS Spotlight on Indian Electronics | Page 72

7
NET ZERO IMPORTS
Disability
Inadequate availability of components
Government initiatives
Ÿ Extension of Preferential Market Access to new product segments ( Laptop PCs , LED Products , Smart cards , Tablet PCs , Desktop PCs , Dot Matrix Printers , Biometric Access Control , Biometric iris sensors )
Ÿ M-SIPS - Subsidy for investments in capital expenditure - 20 % for investments in SEZs and 25 % in non- SEZs for production of components
Ÿ EMC - With approval of 10 Greenfield EMCs and 53 Brownfield EMCs ( in principle ), investments in component manufacturing in India are increasing
Poor Infrastructure
Ÿ
Creation of Electronic Manufacturing Clusters ( EMCs )
Ÿ
Creation of R & D Centers
Ÿ
Development of port infrastructure
International Marketing costs
Ÿ Ÿ Ÿ
Digital India Campaign Make in India Campaign Smart Cities Projects
As per the EY study , for the ITA-1 Low Value sector , comprising
Ÿ
Chargers / adapters , battery and wired headsets / speakers ,
of PCs , Notebooks , Mobile Phones and tablets , the overall
for manufacture of mobile handsets – 2 % without CENVAT
disabilities reduced to some extent ( by 1.5 %) due to the
credit or 12.5 % with CENVAT credit
positive initiatives taken by the government between May 2014
Ÿ
Consumer premise equipment ( CPE ) viz . routers ,
and January 2015 .
broadband modems , set-top boxes , CCTV camera / IP
In addition to the policy interventions mentioned above , the
camera etc . – 4 % without CENVAT credit or 12.5 % with
Budget , 2015 brought in the following favourable policies :
CENVAT credit .
Ÿ
Exemption from customs duty and excise duty on
On similar lines , an extension of the lower excise duty provision to
procurement of all goods ( parts , components , accessories
laptops , notebooks and PCs without CENVAT credit , with exemption for
including sub-parts ) for use in manufacture of tablet
parts and accessories , will go a long way in promoting manufacture of
computers
these products in India .
Ÿ
Option of concessional rate of excise duty of 2 % ( without
To reiterate in this context , while mobile phones and tablets
availing CENVAT credit on inputs and capital goods ) on the
are consumption devices ; laptops , notebooks and PCs are
finished goods or alternatively , the option of standard
creation and productivity enhancing devices , which are largely
excise duty rate of 12.5 per cent with full CENVAT credit to
used in the services and manufacturing sectors . Increased
tablet computers .
investments in such devices will boost productivity and GDP ,
The above policy initiative has encouraged many mobile phone
besides creating employment and improving the balance of
manufacturers to draw up plans for manufacturing in India ,
trade of the Indian economy .
including the USD 5 billion dollar investment envisaged by
Secondly , not extending the fiscal incentive to NBs and DTs
Foxconn . Given that the policy announcement was only
drastically reduces component supplier scale and inhibits
formalized in July 2015 , and mobile handset manufacturing
ecosystem growth . NB motherboards comprise 60 %+ of the
requires green-field investments , it may take some time for
supplier production . Given the overlap of suppliers between
actual investments and manufacturing to start .
smartphone , tablets and NBs , excluding NBs and PCs from the
Further , Budget 2016 has extended the differential duty regime
tax benefits limits the scale .
to the following categories of products :

7

Policy interventions needed for achieving ' net zero imports '
The policy interventions from the government have already started showing results to bring the disability down for select product categories . However some of the other product categories , especially ITA-1 products are still facing significant disability challenges .
While the policy interventions for addressing the disabilities on account of physical factors may take some time , the current state of fiscal disability can be a quick win .
7.1 Quick wins
On similar lines as for mobile phones and tablet computers , an extension of the lower excise duty provision to laptops , notebooks and PCs without CENVAT credit , with exemption for parts and accessories , will go a long way in promoting manufacture of these products in India . In this context , it must be noted that while mobile phones and tablets are consumption devices ; laptops , notebooks and PCs are creation and productivity enhancing devices , which are largely used in the services and manufacturing sectors . Increased investments in such devices will boost productivity and GDP , besides creating employment and improving the balance of trade of the Indian economy .
It is suggested that a differential duty regime should be provided to key components used in the manufacture of desktops , laptops and servers , namely , Populated Printed Circuit Boards ( PCB ) and Switched-Mode Power Supply ( SMPS ), which constitute approximately 15 % of the cost of a PC . Even though these components are manufactured in India currently , import substitution of these components has been limited . A differential duty regime for these components would
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