Budget 2017: Government increases incentives for electronics sector including 'record allocation'

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% for investments in special economic zones (SEZs) and 25% 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 percent 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% 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% to 5% 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.


Published Date: Feb 02, 2017 10:37 AM | Updated Date: Feb 02, 2017 10:37 AM