Electronics manufacturing is amongst the nine pillars of the Digital India Initiative, which also has an in-built ambitious vision of Net Zero Electronics Import by 2020. At present, more than half the demand continues to be met through imports. India’s share in global production is only about 2.5%. The sector presents a huge opportunity for manufacturing in India, if certain constraints are eased.
Compensation of Disabilities
ICTE manufacturing in India suffers disadvantages as compared to its international counterparts, on account of the high costs of finance, power and logistics. The disability increases with value addition and is estimated to be about 10% for 50% value addition. While such high costs impact the entire manufacturing sector, it is a matter of serious concern for the ICTE sector which is the first industry in the country to face elimination of duty on account of India signing the ITA-1 agreement. The industry is finding it difficult to compete with imports at zero duty.
CII requests the Government to allow weighted deduction of the cost of power, finance and inland transportation as captured in the audited balance sheet from the taxable corporate income.
Making Manufacture of ITA-1/ Zero Duty Products Competitive
Correction of Inverted Duty
The inverted duty structure on LED televisions wherein the key input which is the Open Cell (which constitutes almost 65% of the total cost of the material) attracts a basic customs duty of 5%+ surcharge, whereas the finished product attracts a duty of 0% under the ASEAN FTA, resulting in large imports. CII calls for reducing the duty on Open Cell to zero, and reduction in duties on other imported parts of back light units for domestic manufacturers.
Development of Components Base
To encourage exports, and to meet the ambitious vision of Net Zero Trade in electronics, it is recommended that 100% income tax exemption be given on export income to ICTE manufacturers in the DTA.
Development of Demand
Encouraging Design-led Manufacturing and R&D
R&D lab facilities should be made available to the ICTE industry for R&D activities. To encourage the use of domestically-manufactured components in the final product, it is important that the design is also done in the country. There is a strong need to incentivize ‘Designed and Manufactured’ in India.
R&D units are unable to raise working capital for the exploitation of their inventions. A separate fund for supporting these should be created by the Government.