The Narendra Modi government appears to have taken steps towards containing India’s dependence on electronics imports with a few budgetary proposals that meet some of the long-pending demands of the ESDM (electronics system design and manufacturing) sector.
A key proposal, which seeks to exempt all components used in the manufacture of personal computers from 4 per cent special additional duty (SAD), reverts the 'inverted duty structure' that the industry has pin-pointed to as the sole deterrent for companies to manufacture locally. The Budget also proposes to exempt 2 per cent SAD on PVC sheet and ribbon used in the manufacture of smart cards. Given the increasing penetration of smart cards, this too is a significant intervention, industry experts say. The Budget makes special mention of the two semiconductor wager manufacturing units, approved in February last, as a ‘critical sector’; the Finance Minister has proposed support here in the form of investment-linked deductions. The Finance Minister also proposed to impose a 10 per cent customs duty on telecom products that are imported (only those that fall under the purview of the Information Technology agreement). This, however, only impacts enterprise products such as routers, VoIP phones and network infrastructure, says Anwar Shirpurwala, Executive Director of Manufacturers Association of Information Technology (MAIT), an industry body.
Overall, the MAIT welcomes these proposals as it believes it will provide an impetus to local manufacturing. In addition to these exemptions, Mr. Shirpurwala believes increased focus on broadband and e-governance will help spur demand which can now be locally sourced. It was also proposed that education cess be imposed on imported electronic products to provide parity between domestically produced goods and imported goods.
Ashok Chandak, Chairman, India Electronics and Semiconductor Association (IESA), welcomed the budget’s commitment to “making India the Design Led Electronics Manufacturing hub.” In an official statement, he said that good days are ahead for the electronics industry, alluding to the BJP's poll campaign slogan.
Another consumer electronics segment that was specifically addressed in the 2014 Budget was television sets. The Finance Minister proposed to exempt colour picture tubes from basic customs duty, a move that is likely to push down the prices of cathode-ray TV sets. The idea is to not just push down the prices of TV sets but also to encourage manufacturing of these basic sets in the SME sector. The more expensive and upscale LCD and LED televisions (flat panels) also find mention.
To encourage local manufacturing, the government has proposed to do away with customs duty on LCD and LED panels (existing 10 per cent).
