Consumer durables makers want the government to abolish or at least reduce in the coming Budget the customs duty on imports of components used in making refrigerators, washing machines, air conditioners and microwaves.
This, in turn, will boost the government’s Make in India campaign. If duties on components come down, the cost of locally made products will decline and these will be competitive against imports.
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“The government must reduce the customs duty on parts and components of consumer appliances from the current 7.5-10 per cent to zero in order to make manufacturing in India more competitive,” said Kamal Nandi, business head and executive vice-president, Godrej Appliances.
According to the Consumer Electronics and Appliances Manufacturers Association (CEAMA), which represents the Rs 45,000, crore industry, the excise duty on LCD and LED panels, used in making televisions, mobile phones and tablets, should be abolished. Customs duties on components like magnetrons used in microwave ovens and pre-printed steel sheets used in air conditioners, washing machines and refrigerators need to be lowered to encourage manufacturing of these appliances in India.
“A reduction in the customs duty on OLED modules and import of parts for manufacturing air conditioners, washing machines and refrigerators are needed,” said Manish Sharma, president of the CEAMA and managing director, Panasonic India and South Asia.
At present, most high-end consumer durables are imported as finished products because their components are not available in India. According to a study by Corporate Catalyst India, only 30-35 per cent of electronic components are available from local sources and semiconductors are imported almost 100 per cent.
The steel finishes used in refrigerators are not locally available. Similarly, energy-efficient compressors, motors, and some blowing agents and electronic components have to be imported. About 1.5-2 million flat panel TVs in a six-million market are imported every year, and for the rest the components are imported.
According to industry estimates, 65-70 per cent of parts going into locally manufactured products such as TVs, refrigerators, washing machines and air conditioners come from China, Japan, Indonesia, Malaysia and Taiwan. Also, high-end products in these categories are completely imported. Laptops, tablets, microwave ovens and digital cameras are all imported as completely built units from abroad.
South Korean consumer electronics major Samsung has said it manufactures all its consumer electronic products here, barring high-end refrigerators, ultra high-definition TVs and microwave ovens. However, the components are imported.
After a long lull, the previous festive season proved to be lucrative for the sector with an upsurge in sales, said Sharma. The recent rollback of the excise duty had led to an increase in product prices, affecting consumer sentiment and leading to a subsequent drop in sales. “We want a reduction in the excise duty for an overall boost to the sector,” he added.
According to CEAMA, introduction of the oft-proposed national goods and services tax (GST) will decrease the compliance burden for businesses, create a pan-India market and eliminate cascading taxes. “The budget needs to remove inefficiencies in the system like the inverted duty structure to pave the way for an efficient GST,” CEAMA stated.
The special additional duty pushes up the burden for the manufacturing sector, along with a countervailing duty of 17 per cent against an output excise duty of 12 per cent. This was not aligned with the ‘Make in India’ initiative as it discouraged multinational companies from manufacturing in India, CEAMA added.
The government also needs to promote local manufacturing of components like electron guns, metal parts used in televisions, compressors, electric motors, and plastic components for household appliances like washing machines, refrigerators and air conditioners, according to CEAMA.
“The finance minister needs to remove the anomaly of the inverted duty structure. We hope this Budget boosts growth of consumer durables manufacturing,” said an executive with LG. “We seek from this Budget measures that will stimulate demand,” said Shantanu Das Gupta, vice-president, corporate affairs and strategy, Asia South, Whirlpool.