SPOTLIGHT ON INDIAN ELECTRONICS Spotlight on Indian Electronics | Page 77

NET ZERO IMPORTS
# Particulars Net gain to PC manufacturer
- 12.5 % represents the present excise duty on PCs , - 2 % represents the differential duty for PCs without the provision for input tax credit , and - 0 % represents the non-availability of any input tax credits .
2 If a differential duty regime at 2 % of Central Excise duty is also introduced for key components such as populated PCBs and SMPS , assuming that : - PCBs and SMPS constitute 15 % of the cost of the PC - CVD applicable at 12.5 %, - Zero import substitution of such key components initially , Then the net gain for PC manufacturers would be ( 12.5 % -2 %) – ( 12.5 % x 15 % of total cost )
3 If a differential duty regime at 2 % of Central Excise duty is also introduced for key components such as populated PCBs and SMPS , assuming that there is full import substitution of such key components and all such components are domestically procured Then the net gain to the PC manufacturers would amount to ( 12.5 % - 2 %) – ( 2 % x 15 % of total cost )
8.625 %
10.2 %
In the above example , we see that the net gain to PC
Increased domestic production would result in additional
manufacturer ( or reduction in revenue cost to the government )
domestic value added , which in turn would yield additional
due to introduction of a differential duty regime for PCs is
income and consumption tax revenues to the governments .
reduced marginally from 10.5 % to 10.2 % due to the
These so called multiplier effects ( i . e ., additional value added
simultaneous introduction of a differential duty regime for
in the economy ) would vary in the short term and long term .
some key components . Such reduction in revenue cost for the
In the short term , there would be substitution of domestically
government will also be accompanied with greater value
assembled / manufactured finished products for imports , with
addition and job creation within the country . In due course of
no increase in the domestic production of components and
time , as economies of scale are built up , the differential duty
parts . The quantum of additional value added from such
regime could be extended to more components , encouraging
substitution would be modest , as assembling of imported
further value addition and job creation within India .
products generates domestic value addition of only 5.5 % of
Positive revenue impact of multiplier effects
total output value of finished products . The value addition ( and
The degree of substitution of domestic products for imports
the resulting multiplier effects ) would be much larger if the
could vary depending on the nature of competition between
policy measures also result in increased domestic production of
the two . It would be unrealistic to assume that domestic
components and parts .
manufacturers would be able to capture 100 % of the domestic
The short-term improvement in value addition is estimated to
market . For illustrative purposes , we have shown revenue cost
be modest , even assuming that imports of finished products
assuming there is 100 % reduction in imports .
are reduced to zero . The longer term improvement in value
A limited survey of major producers in the country suggests
addition would be much larger .
that they do have substantial unutilized capacity , and would be
The table below provides some possible scenarios in terms of
able to ramp up production very quickly to at least double their
additional employment , income and tax revenue generation .
share in the domestic market .
# Description A
Units
FY15 ( est .)
DEMAND
Total demand ( est .)
Mln nos .
10.60
11.21
12.33
14.80
17.76
21.31
FY16 ( est .)
FY17 ( est .)
FY18 ( est .)
FY19 ( est .)
FY20 ( est .)
- Domestic production Mln nos . 2.50 2.68 6.17 11.10 15.98 21.31 - Import Mln nos . 8.10 8.53 6.17 3.70 1.78 –
B
EMPLOYMENT
Assembly – average employment per million units
Nos . 658
Employment multiplier for
No .
2
2
3
3
4
4
component mfg .
Total employment ( est .)
Nos .
4,935
5,292
16,227
38,944
46,733
56,079
- Assembly Nos . 1,645 1,764 4,057 9,736 11,683 14,020
- Component manufacturing Nos . 3,290 3,528 12,170 29,208 35,049 42,059
Spotlight on Indian Electronics 2016 | 77