Government today announced various measures for the electronics sector which includes "record allocation" of Rs 745 crore towards incentive schemes like M-SIPS and EDF and duty exemption on POS machines, though the announcements fell short of enthusing domestic manufacturers.
MSIPS provides subsidy for capital expenditure -- 20 per cent for investments in special economic zones (SEZs) and 25 per cent in non-SEZs.
A number of global leaders and mobile manufacturers have set up production facilities in India, Finance Minister Arun Jaitley said while presenting Union Budget 2017-18 in the Lok Sabha.
"I have therefore exponentially increased the allocation and incentives of schemes like Modified Special Incentive Package Scheme (M-SIPS) and Electronic Development Fund (EDF) to Rs 745 crore in 2017-18, this is an all-time high," the FM said.
"We are also creating an ecosystem to make India a global hub for electronics manufacturers. Over 250 investment proposals for electronics manufacturing has been received in the last 2 years, totalling an investment of Rs 1.26 lakh crore," he added.
ELCINA Electronic Industries Association of India Secretary General Rajoo Goel said, "It is not consistent with respect to the request of Rs 1.26 crore investment proposal. The M-SIPS application date will end in 2018. If we calculate on the basis of 25 per cent subsidy on capital expenditure then, as per our observation, projects worth Rs 3,000 crore can be implemented in 2017-18."
The government increased 2 per cent customs duty on import of printed circuit boards that will lead to increase in price of low cost mobile phones in around same proportion.
The budget, however, skipped extension of differential duty on mic, receivers, metals and plastics, key pad and USB cables as demanded by handset manufacturers proposed under phase manufacturing programme-2.
"Phased manufacturing programme is at the heart of development of mobile ecosystem to achieve target of 500 million handset production by 2019 and export target of 120 million mobile phones by 2019-20. Though the budget does not talk about it, we expect it to be raked up during debate," Indian Cellular Association (ICA) National President Pankaj Mohindroo said.
The IT hardware industry body MAIT also expressed disappointment on the budget.
"The budget has been a big disappointment for us. It could have brought in consumer premise equipment, personal computers, servers under differential duty which could have had multiplier effect on manufacturing in the country. This would have brought value chain in manufacturing of computers in the country," MAIT Vice President Nitin Kunkolienker said.
The government removed all duties on devices used in the process of cashless transactions like point of sales machines, finger print readers etc to push digital payments and components used to make them.
"Waiver of all duties will result in a flood of imports without enabling creation of a local industry. A big opportunity for manufacturing these products in India would be lost," ELCINA Co-Chairman Policy panel B S Sethia said.
The government also reduced basic customs duty from 10 per cent to 5 per cent on all parts for manufacture of LED lights or fixtures, including LED lamps, subject to actual user condition -- a move that industry feels will encourage imports.
"Reduction of Basic Customs Duty to 5 per cent on these would result in raising imports of these parts. Further inputs of LED Drivers have been brought under 5 per cent BCD though presently these are at zero BCD as all are ITA (Information Technology Agreement) bound," Goel said.
He said that while the move on LED Drivers inputs could help in enhancing local sourcing of components but imports are likely to happen without actual user condition to avoid the 5 per cent BCD.
"The aim of greater local value addition and local sourcing of inputs for drivers would thus be obviated," he said.
Indian Electronics and Semiconductor Association (IESA) said exemption given for Micro PoS if Digital Payment needs to really happen in the grassroots level then the country needs at least 5 lakh terminals in a very short period of time.
"We think this is a temporary step just to tie over the immediate demands of the micropause system that is required. There is enough capacity to manufacture terminal blocks but not enough products to meet the immediate demand," IESA Chairman K Krishna Moorthy said.
He said allocation and incentives of schemes like MSIPS and EDF to Rs 745 crore will reflect a strong commitment to promote local value additions in electronics manufacture.
"The overall tax reliefs given to start ups and MSME's will boost sustainable employment and the quality of start-ups in the design led manufacturing sector," IESA President M N Vidyashankar said.
Telecom equipment maker VNL appreciated budgetary support of Rs 10,000 crore to the BharatNet initiative to bring broadband access to more Gram Panchayats this fiscal.
"However, we would have liked to see some initiatives for the promotion of the indigenous telecom equipment manufacturing industry, and a boost to the Design in India and Make in India programmes," VNL Telecom Chairman and Founder Rajiv Mehrotra said.
The Consumer Electronics and Appliances Manufacturers Association has said that incentives of Rs 745 crore for M-SIPS and EDF would help the industry.
"The decision to extradite special additional duty of 2 per cent (SAD) on populated printed circuit boards (PCB's) used in mobile phones imported in the country will upgrade the roadmap towards Make in India," said CEAMA President Manish Sharma.
Consumer electronics makers have hailed government's move to levy special additional duty of 2 per cent on populated printed circuit boards used in mobile phones, saying the move would promote domestic manufacturing of such components.