New Delhi, 5th July 2019: ICEA Chairman Mr. Pankaj Mohindroo welcomes the maiden budget by the Finance Minister, Ms. Nirmala Sitharaman with its emphasis on protecting the domestic industry and promoting manufacturing. He specially noted the complete write up of capital expenditure in the first year itself of new units of hi-tech sector. Semi-conductor fabrication, Lithium storage batteries, computer servers, laptops are specifically mentioned in the FM’s speech.
He suggested that the government to ensure that the electronics manufacturing industry is covered under the sunrise and advance technology category since an eco-system for manufacturing will come about only through proper linkages in the ecosystem. He added that, while we have seen green shoots in mobile phone and component manufacturing, there is a long distance to travel before we become truly competitive and become a global hub for mobile phone and electronic manufacturing.
ICEA thanks the government for accepting the industry demands for special dispensation to give zero duty to capital goods for the manufacture of basic electronic items like –
- i) Populated PCBA, ii) Camera Module of cellular phones, iii) Charger/Adapter of cellular mobile phones, iv) Lithium Ion Cell, v) Display Module, vi) Set Top Box and vii) Compact Camera Module.
As many as 110 machineries and instruments have been inserted in the exemption. However, the Chairman suggested that the government should also look into the demand of the industry for the exemption of IGST on these capital goods which is typically 18% in the general case for the desired effect of increase inflows of these high-tech capital goods. The procedure for set off takes many years and there is no provision for refund.
The removal of basic customs duty on capital goods for manufacturing of parts and components is a welcome step. It will reduce capital cost by 7-10% and improve competitiveness. Many such steps will lead towards making India the most competitive nation in mobile phone manufacturing ecosystem and will eventually reduce cost for consumers
The Chairman expressed disappointment that ICEA suggestion on correction of codes against the key notification (57/2017) for manufacturing which covers important parts and components have not yet captured the attention of the Department of Revenue (DoR). This omission is affecting the manufacturing of mobiles and their parts with many consignments stuck in interpretation disputes at various stages in the customs formation. We hope that the final finance bill presented to the parliament take this on record. However, we express thanks to the rewording which will clarify the scope of the notification (57/2017).
The measure to promote the air conditioner manufacturing industry by correcting the anomaly of the indoor and outdoor units of split air conditioner at a lower duty compared to CBU.
Mr. Pankaj Mohindroo, Chairman ICEA said that, ‘India is still in the initial phase of mobile component manufacturing and the Phased Manufacturing Program (PMP) only covers certain parts. The architecture of PMP did not intent any duties to be imposed on components specified other than those notified. The 15% BCD on other components is an anomaly and must be corrected. This needs urgent attention.’
Other measures to protect the industry of i) Loudspeakers, ii) DVR, iii) Network video recorders, iv) CCTV, v) IP cameras and vi) Optical Fibres are welcome but they should be backed by a soft Phased Manufacturing Program with a graded duty structure with zero duty for raw materials to create a differential to rationalise as in the case of mobile industry to throttle import in the short term and quickly bring out an export oriented program to kick off robust exports by 2020.
The measure to protect the common electronic items to throttle imports to begin with like i) chargers, ii) plugs, iii) sockets, iv) switches etc. of other electronic products is also welcome but the raw materials for this must be available at international prices to make the industry competitive.
ICEA has suggested to the government to consider the recommendation on protecting the industry from FTA imports, specially Vietnam. Also, the major suggestion for reform on IGCR rules for manufacturing under bond at zero duty on inputs should be implemented at the earliest. The DoR has already issues draft rules for reform but the release of final rules in this budget has not seen the light of the day.
