Union Budget Expectations from Electronics Industry

After the year hit by the pandemic which put the economic activity on a standstill, industries are now eying Union Budget 2020-2021 which is scheduled to be announced on February 1.

Indian electronics manufacturing, like most other sectors, has gone through a challenging phase due to the COVID-19 pandemic and related restrictions. To mitigate this, the Electronic Industries Association of India (ELCINA) has come up with a few recommendations which are as follows:

Custom Duty on Non-ITA PCBAs:

Printed Circuit Board Assemblies are a huge opportunity in electronics manufacturing. ELCINA recommends that a customs duty of 10-20 per cent should be imposed on all Non-ITA classified PCBAs keeping a duty differential of at least 5 per cent with its finished equipment. This can attract big investments in the PCBA sector which have huge potential to grow from the current 23.5 billion dollars to 152 billion dollars in the next 5 years.

Scheme for incentivizing Capital Investment in ESDM sector:

The Indian ESDM Industry is suffering from a disability of 8-10 per cent viz-a-viz their international counterparts. To mitigate this disability the industry needs a scheme for the PCBA/EMS sector providing 25 per cent Capex subsidy. Similar benefits have already been announced for electronic components. This will also enable MSME’s to invest in this business.

Domestic manufacturers face global competition and are constrained by lack of test and certification facilities in the country. This is special true when Indian manufacturers try to export their products to developed markets which require stringent quality approvals. These facilities are not available in India and getting certifications from overseas is prohibitively expensive. The Government of India should support testing and BIS should also facilitate domestic companies, which is not happening currently.

FTA status to SEZ products:

Goods cleared from SEZ/EOU/EHTP to DTA are treated as imports and all duties which are applicable on imports are charged in such cases. ELCINA recommends that SEZ/EOU/EHTP to DTA clearance should be considered as imports from FTA countries, and this may be applicable for FTA Notified items only. This will encourage manufacturing in these zones and maintain parity between DTA vis-à-vis SEZ/EOU’s.

Encouraging Design led manufacturing:

R&D and Design are critical for sustained growth and maintaining competitive edge for industry, and especially for a dynamic industry like Electronics, where innovation takes place at a rapid pace. It is recommended that the Government should incentivize R&D by allowing CSR funds to be channelled for research, innovation and support to start-ups.

While National Policy on Electronics 2019 (NPE 2019) has given an impetus to Mobile manufacturing and some components, we hope the government will announce more incentives to promote electronic manufacturing in emerging domains as well as PCBA/EMS and components manufacturing.

''This is necessary if we aspire to achieve the ambitious target of 400 billion dollars electronics production by 2025.