New Delhi, February 25: The government is against the introduction of a phased indigenisation policy for the electronic goods manufacturers as demanded by the components industry.The department of electronics is however favourably disposed towards the other proposal of the electronic component manufacturers such as duty rationalisation for raw material imports, reduction in customs tariff on capital equipment and cut in excise on components and finished goods. The department is expected to include this in its recommendations to the finance minister for the budget for 1998-99.
Additionally, the DoE is expected to recommend reduction of excise on colour televisions to the lowest slab of 8 per cent.
The Electronic Component Industries Association (Elcina) has proposed that the government should frame a localisation policy for the electronics goods manufacturers on the lines of a similar guideline regulating the multinational automobile companies.
Under the indigenisation schedule for the automobileindustry, manufacturers are required to localise to the extent of 50 per cent in the first three years and to the level of 70 per cent in five years.
Top DoE sources felt that the components industry should seek to upgrade their products and quality instead of proposing an indigenisation policy.
The component manufacturers should enter into joint ventures with multinational companies which are global suppliers to the global electronics majors, the DoE officials felt.
The DoE sources further felt that any step taken to impose localisation policy could be seen as roll back of the reforms process now in place.
Consumer electronics is a delicensed sector, and therefore no permits are required to set up a manufacturing unit.
The policy also permits manufacturers to source components and parts from global vendors.
At present, large number of manufacturers are sourcing components, particularly the smaller and critical ones, from vendors in Taiwan and China.Elcina, however, felt such policy was necessaryto strengthen the domestic electronic component industry which has been reeling under the onslaught of the easy imports permitted into the country.
Top level Elcina sources said: ``We are not asking for protection but for cohesive policy which will set some guidelines on indigenisation.'' At present, many companies--both domestic and multinational, are importing components from cheaper sources of supply such as Taiwan and China.
``Indigenisation should be encouraged to make the domestic component industry competitive,'' Elcina sources said.
In contrast, DoE officials felt that global electronics players will source components locally, if high quality products are available to them at reasonable price.
Elcina has further stated that anomalies in the existing customs tariff with regard to raw materials and components should be rectified while maintain a status quo on the level of rates.
It has also suggested that the excise duty on colour televisions be reduced to 8 per cent from the present level of18 per cent.
At present, though most electronic components and goods attract import duty of 20 per cent, some raw materials such as speciality chemicals and high purity metals used in manufacture of components attract peak rate of duty of 40 per cent. Elcina felt that customs duty on these speciality chemicals and high purity metals, which are imported in small quantities, should be reduced to the general level of 20 per cent.
The association has also proposed that the component manufacturers be allowed to import capital goods necessary for setting up production facility at nominal rates of duty, such as up to five per cent. The DoE is expected to recommend that the duties on capital goods be brought down to 10 per cent.It was further suggested that the excise duty on the components be brought down to a uniform level of 8 per cent, instead of levying rates of 13 per cent and 18 per cent, as the finished go-ods manufacturers were eligible for Modvat benefit.
``This will reduce the quantum of workingcapital blocked by purchase of components,'' Elcina felt. In addition, the components industry wants the government to draw up a select list of components and products that should be indigenised, Elcina felt.
Copyright(c)1998 Indian Express Newspapers (Bombay) Ltd.
