At a time when the Centre is talking about ‘Make in India’ and promoting electronics manufacturing in the country, Chinese PC-maker Lenovo is finding it tough to make computers at its local unit here due to lack of incentives.

One of the largest PC manufacturers, Lenovo told BusinessLine that the facilities they put up for manufacturing PCs in India, years ago, are largely sitting idle, as there is no support from the government to enable PC manufacturing in India.

“Today, component ecosystem is not there for PC manufacturing in India. Manufacturing PCs in India (as of today) means just assembling and PC assembling is not a high-end process. We are asking government to incentivise local manufacturing. They don’t say no but they’ve not said yes either,” Rahul Agarwal, Managing Director at Lenovo India, told BusinessLine .

Taxes on PCs in India are structured in a way that importing PCs and manufacturing them locally attract the same duties. That leaves manufacturers with no incentives to manufacture locally as that requires setting up additional manufacturing lines and overheads, which is an overhead that no manufacturer is willing to take.

Tax difference

Compare that to local mobile phone manufacturing, which was almost non-existent about two years ago in the country. By creating a tax difference between importing versus manufacturing locally at about 6-8 per cent, the government has been able to ensure that all mobile phone brands, including Apple, have set up local manufacturing here. Almost none of them had any manufacturing units in India prior to change in government policy two years ago.

However, Lenovo, Dell, Acer and HP set up manufacturing units in India over a decade ago, eyeing at catching on to the growing demand in the country. But the lack of component ecosystem in the country, which could not develop for the lack of support from the government, most of these manufacturing units have turned into little more than box movers.

“The government is more excited by smartphones. But PC industry last year grew faster than smartphone industry. Maybe they will take note of this,” Agarwal said. “We are talking to the government through MAIT. In the long-term, PC will only grow because once people get a taste of internet through smartphone, they’ll see the benefit of a larger device for education of children.”

Growing PC sales

While PC sales have been on a decline globally, sales are still on the rise in India. Last year, PC shipments in the country grew at 19 per cent, surpassing smartphone shipment growth. According to an initiative by the Central government in 2013, locally manufactured PCs were to get preference in government tenders through Preferential Market Access policy. But five years since, the scheme has been a non-starter.

The government-buying contributes to about 11-12 per cent of overall PC sales in the country. With just the PMA scheme implemented, it would’ve given enough impetus to manufacturers to look at local manufacturing of PCs.

“Right now they are not clear what to do. To incentivise people to manufacture PCs in India, the government will have to forego some revenues initially. On phones, if you manufacture in India, it is about 7-8 per cent cheaper. But to manufacture PCs in India, it costs the same. So, for us, local manufacturing is not a focus for now,” Agarwal said.

Related Topics
comment COMMENT NOW