 "Tax structure, lack of incentives impacting electronics manufacturing: CEAMA")
In a letter to the Commerce and Industry Ministry, Consumer Electronics and Appliances Manufacturers Association (CEAMA) said currently the tax structure on imports of parts and components to manufacture a product attracts huge customs and excise duty.
An inverted duty structure impacts domestic industry adversely as manufacturers have to pay a higher price for raw materials in terms of duty, while the finished product lands at lower duty and costs lesser.
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"The current taxation regime is a disincentive for attracting investments, creating employment opportunities and building lndia's electronic manufacturing capabilities.
"The major setback for the electronic industry is that there is no incentive for indigenous manufacturing of components. As a result, most of the components are currently being imported," the letter said.
It also said that labour policies in lndia are not favourable for manufacturing as compared to other competing countries such as China, Thailand and Korea.
Further, it asked the government to extend the Modified Special Incentive Package scheme (M-SIPS) to help manufacturers and put the consumer appliance under the category of consumer electronics to promote investments.
There is an urgent need to define the scope of consumer electronics by bringing clarity under M-SIPS, it said.
"This is refraining industry players from submitting their investment proposals since there is lack of clarity on whether consumer appliances like washing machines, microwave, refrigerators and air-conditioners are included under consumer electronics," it added.
M-SIPS, which was designed to encourage investments and create jobs, is expiring on July 27, 2015.
"We recommend that the scheme should be extended and the manufacturers should be given enough time to comply with the same," said CEAMA.
According to CEAMA President Manish Sharma, if the scheme is extended and manufacturers are given time to comply with the same, it will act as a catalyst in identifying technology spill-over effects like transfer of skill personnel, growth of parts and components supplier networks and user-producer linkages.
"Also, broadening its scope will trigger significant growth of the sector, especially for products such as washing machines, microwaves, refrigerators and air-conditioners and so forth," said Sharma, who is also Managing Director Panasonic India & South Asia.
Total investment proposals under M-SIPs are approximately worth Rs 65,500 crore; however, for consumer electronics it is just 1 per cent of that.
It has also asked for expansion and creation of new electronic manufacturing clusters by the government.
At present, India is importing electronic goods worth USD 100 billion a year and the import bill is likely to cross USD 400 billion by 2020.