Govt's decision to hike duty on TV cells to further increase prices

The planned 5 per cent increase in duty on open cells to further worsen TV makers plight

Turning down the demand of domestic TV manufacturers, the government has decided to reimpose 5 per cent customs duty on open cells, a key component for television manufacturing, from October 1.

The Rs 25,000 crore TV industry said the move is expected to lead to price hikes across the market and put additional burden on TV makers in the country that are already struggling with inadequate supply. However, the government sources did not agree with the possibility of any major price hike.

The 5 per cent customs duty exemption for import of the component was given for a year till September 30.

This exemption was given to the industry as it had sought time to build domestic capacity for open cell, said a finance ministry source. He was responding to a query on whether television sets are going to cost more from October.

This move is elemental to the phased manufacturing plan (PMP) of television sets and components to bring the television industry out of the crutch-walking, said a top government source, who did not wish to be named.

 

He added,“For how long can such import duty sops continue? The TV industry is well aware of the basic tenets of phased manufacturing.

The sop was offered for a limited period of one year in anticipation that the industry would build capacity for manufacturing critical components in India.”

For India to be atmanirbhar, domestic manufacturers cannot remain merely assemblers of imported parts, the source said. Manufacturing in India cannot survive on support of imports forever, he added.

Another source, in the know of the matter, said televisions worth Rs 7,000 crore were imported last year.

Industry players, however, are less enthusiastic.

Kamal Nandi, President  of the Consumer Electronics and Appliances Manufacturers Association (CEAMA), and Business Head & EVP, Godrej Appliances, said,"The resumption of customs duty on open cells will put added pressure on the TV industry which is already reeling under stress due to Covid. This may make the domestic manufacturing uncompetitive and expensive. Open cell panels form nearly 65 per cent  of the total production cost of television and the imposition of duty may have an impact on the overall pricing of TVs."

According to Arjun Bajaj, director at Videotex International, a leading original device manufacturer, prices of open cell panels have already surged by over 100 per cent since June. 

“Supply of panels is falling well short of the current demand and this has led to doubling of open cell prices for the most sold 32 inch models. We are effecting price hikes already and are placing orders to suppliers only for the necessary demand,” he said.

For the second most popular size 40-43 inch, the increase in price of open cell so far has been more than 50 per cent. This, according to industry executives, has led them to hike prices by 30-40 per cent for the range.

 

Increasing import duty on TV panels has been the bone of contention between manufacturers and the government for the past few years.

In fact, import restrictions on larger panels (more than 55 inches), recently led top brands like Samsung, LG & Sony, among others, to make representations to officials.

At 16 million units a year, India is the fourth largest TV market in the world and growing much faster than other major markets. According to Avneet Singh Marwah, chief executive officer (CEO) of ODM Superplastronics, rapid shift towards online education and OTT content in recent times is fueling growth further.

But since no one makes panels locally, India’s dependence on imports will continue for some time. “We are totally in favour of local production but the shift should happen gradual,” he said.

The government has supported the television industry through the customs duty structure. A customs duty of 20 per cent has been imposed on imported finished TV sets since December 2017. 

This high protection benefitted all domestic TV manufacturers.

For TV makers that are already under pressure, customs duty hike would lead to an additional price increase of close to four per cent.

Prices may go up by a minimum of Rs 600 for a 32-inch television set, Rs 1200-1500 for a 42-inch TV set and even higher for a large screen models. Open cell panel is the most crucial component for flat panel TVs and forms over 65 per cent of their total cost of materials.

To this, the government source rejected it as “misleading and exaggerated” argument, stating that these leading brands are importing open cell for a basic price of Rs 2,700 for a 32 inch TV and about Rs 4,000 to Rs 4,500 for a 42 inch television.

The impact of 5 per cent duty on open cell would, thus, not be more than Rs 150-Rs 250 for a television, he said.

 

Television import has also been put on the restricted category with effect from the end of July this year. Thus, television manufacturers are enjoying full reasonable protection from imports, he added.

When asked why the manufacturing capacity for the cell has still not come in India, the source said, “Newly imposed restriction puts a curb on import of TVs. This market would now be available to domestic manufacturers. This seems to be the reason for domestic manufacturers trying to resort to price increase.”

Explaining the rationale for imposing the duty, the source said that critical items will start being manufactured in India.

“No real manufacturing growth of television could happen unless an open cell is domestically made. The present activity carried out by the industry is only the assembly of television after importing most of the parts. This cannot go on for long as assembly of television does not entail any significant value addition,” he said.