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
Spotlight on Indian Electronics 2016 | 72