Govt’s e-push: handset, PC makers seek more incentives

S Ronendra Singh New Delhi | Updated on June 20, 2014


Want tax regime rationalised to promote manufacturing

Though the Government has zeroed in on a big plan to boost electronics manufacturing in India, industry is not sure about the efficacy of such a move as many other issues need to be sorted out first.

Communications and Information Technology Minister Ravi Shankar Prasad recently said incentives would be given to companies that set up greenfield units in eight cities, including Ghaziabad, Vadodara, Gandhinagar, Ahmedabad, Nagpur and Nashik.

However, mobile handset as well as personal computer (PC) manufacturers feel that incentives apart, the Government should take care of tax issues, which vary across States. “There is hardly anything that would propel me to set up a manufacturing unit here (in India) because there is hardly anything for my operating expense. The incentive scheme will not be a decisive factor for investment in manufacturing,” Vikas Jain, Co-Founder of Micromax, told Business Line.

Tax blues

He said as a first step, the Government should take care of concerns around value-added tax (VAT) and goods and services tax (GST) so that investors benefit from manufacturing.

Ajjay Agarwal, Chairman and Managing Director, Maxx Mobile, said the current tax and customs duty structure makes domestic manufacturing of handsets unviable.

“Handset makers have not been able to shift production from China to India. Affordability will be the game changer for the Indian mobile market, with consumers wanting ‘value for money’ products,” he said.

While industry veterans said the Government was headed in the right direction, they felt all depended on how the global smartphone market moves up.

“Companies that have a base in India will benefit as per earlier policies, but the Government needs to form an economic zone if it wants the Indian industry to take China head on,” said Pardeep Jain, MD, Karbonn Mobiles.

R&D focus needed

“The Government should also focus on research and development and introduce a smooth process for intellectual property rights (IPR), which is a key element,” said Jain. Sriram Dhanyamraju, Executive Director and Head, Manufacturing & Supply Chain Operations, Dell India, said: “Electronics manufacturing is of strategic importance to the country given the expected demand and jobs potential of the sector. We feel this is a step in the right direction and more incentives need to be provided.”

Made in India

In addition, he said: “We would like to see benefits accorded to export of electronics products made in India as this would provide a foundation for the growth of manufacturing here.”

As technology evolves, some believe the Government will also need to factor in future technologies as soon as it implements projects apart from thinking “ahead of the curve”.

“The Government has to look at the industry two-three years down the line, so that when an industry is blossoming it gets into right production. It also needs to take care of the ease of doing business for foreign investors,” said S Rajendran, Chief Marketing Officer, Acer India. Most industry representatives, however, said such initiatives would not make the products — handsets or laptops — cheaper or affordable immediately.

“The Chinese are more competitive in putting together smartphones since the cost of production there is lower than in India. Moreover, tie-ups with international manufactures further add to the sophistication and cost of smartphones,” said Sanchit Gogia, Chief Analyst and Chief Operating Officer at Greyhound Research.

Fab opportunities

Gogia admitted that the Government’s focus on semiconductor fab facilities was bound to create opportunities for hardware and software specialists.

“Further, this will help lower the cost of businessmen who wish to set up new units or go for expansion, as the Government will provide a refund on capital expenditure,” Gogia added.

Published on June 20, 2014

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