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“The Indian colour TV industry is predominantly an assembly industry rather than a manufacturing one, with most players importing semi-finished goods and assembling domestically” - K_V_S_GIRI
While the Centre’s move to put imported colour TVs in the restricted category can provide a fillip to local manufacturing, this implies that companies will still import components and merely assemble it here in India, labelling it ‘made in India’. This move also raises concerns on the prices going up, the quality, as well as exploitation by domestic producers.
According to industry estimates, 70-80 per cent of the components that go into making a TV are still imported and the domestic production of TVs even after restricting imports of Completely Built Units is equivalent to importing 70-80 per cent high-value parts, and merely assembling it in India. .
“There is a possibility of domestic producers exploiting this but this needs to be closely monitored by regulatory authorities. Starting from India’s independence right until the early nineties, most Indian industries ranging from automobiles to steel, telecom to airlines exploited import barriers to maintain virtual monopolies and offer shoddy products and services to generations of Indians. We have to be watchful of this,” Lloyd Mathias, Business Strategist and Angel Investor, told BusinessLine. Import barriers are short term fillips to develop local manufacture and may not always work, he added.
However, this is not to say this move doesn’t have benefits. Mathias said that import barriers are a good way to encourage local manufacturing. Given the government’s loud call for ‘Vocal for Local’, putting Chinese-made colour televisions on the restricted import list fulfils two objectives: lowering our dependence on Chinese imports given the geo-political tensions and providing a push for Indian manufacturing, he said. This move will surely boost electronic manufacturing in India which grew from $29 billion in 2014 to $70 billion in 2019, he added.
The Indian colour TV industry is predominantly an assembly industry rather than a manufacturing one, with most players importing semi-finished goods and assembling domestically, said Isha Chaudhary, Director, CRISIL Research. “With restrictions on import of CBU of colour TV, players are expected to import colour TV components and assemble in India, especially in the near future,” she said. Mathias said that this import of components and resultant assembling in India is inevitable. “But at a macro level one has to understand that even this SKD will mean additional local labour which is welcome,” he pointed out.
Currently, India doesn’t have large-scale manufacturing capability in the colour TV industry and imports 30-35 per cent CBU, said Chaudhary. “Major players in the industry are expected to apply for licence to import colour TV rather than putting up manufacturing units for higher screen sizes as the cost outweigh benefits. Smaller online focussed players are expected to take a hit as they used to import completely built units and sell online,” she explained.
As a first move, this is in the right direction, but there is a long way to go in ensuring domestic manufacturing, said Avneet Singh Marwah, CEO, Super Plastronics Pvt Ltd, (SPPL) and India Brand Licensee, Thomson TV.
Import restrictions can have an impact on quality, improvisation and innovation of products, said Singh. It can also increase prices and this is already happening, he said, pointing out that TV panel prices have already gone up by 60 per cent, compared to two months back. There will be a huge hike in prices of TVs from August onwards, he said. Import restrictions can also lead to exploitation of consumers, he added.
As 70-80 per cent of the components that go into making TVs is still imported, and it’s only the assembling of these components that can be done here in India, the whole ecosystem will only be completed once the major components and panels are also made in India. And right now, we do not have any manufacturer making both of them, he pointed out. A long term strategy that is stable is needed for companies to invest in the country, said Singh.
Currently, India does not have an alternative other than China, said Singh. The alternative used to be Samsung and LG for glass display panels which were from countries like Korea and Vietnam, but they have shut down their lines, he explained. “Hence, now we were heavily relying on Chinese manufacturers for the glass panels.”
Furthermore, there are also talks about custom duty being imposed on TV panels from September onwards, said Singh. “Once we have manufacturers in India and facilities ready for panels, why not, we should have an import duty. And we are with the government on that. But without any alternative, if you want to just impose the duty, I think that’s not fair,” said Singh. This further increases the chances of TV prices going up, he said.
Some level of challenges around the quality can creep in if India is not able to substitute these components from other countries very quickly, and prices of TVs can also go up, affirmed Rajat Wahi, Partner, Deloitte India. Certain kinds of models and products may also not be available in the short term and companies may have to look for substitutes, he added.
When asked about efficient ways of boosting domestic manufacturing in India, particularly while maintaining global competitiveness, Mathias said, “The best way to boost domestic manufacturing are tax breaks and better infrastructure, but even before that India needs to sort out land and labour reforms. India already has a large domestic market for many products – which is a great incentive in itself – and if the local market can absorb a large part of the manufacturing output, that provides for base level demand.”
India also needs to pave the way to make it attractive for global companies to relocate manufacturing through its ‘ease of doing business’, and this means making it relatively easy for companies to set up green field projects through faster and single window clearances, said Mathias.
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