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Coronavirus scare: Manufacturers, retailers flock to offices of ministries

By Arnab Dutta
February 21, 2020 15:33 IST
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From the rollback of customs duty on key electronic components to fast tracking delivery of goods imported from China, players are looking for incentives on several counts.

Amid fears of massive disruption in business across sectors, industry bodies, lobby groups and key players are flocking the offices of union ministries and departments.

As the government opens door to the business community, seeking suggestions to minimise the impact of the impending crisis arising out of the coronavirus epidemic, many are actively peddling their interests in disguise.

 

From the rollback of customs duty on key electronic components to fast tracking delivery of goods imported from China, players are looking for incentives on several counts.

Several industry bodies like MAIT, Indian Cellular and Electronics Association (ICEA) and Consumer Electronics and Appliances Manufacturers Association (CEAMA) that represent all major electronics, appliances and handset players in the country have made representations to the government for roll back of customs duty on electronic components.

With supply of components from China in shortage now, the groups are demanding postponement of higher duties on components to mitigate any increase in production cost.

During the Budget, the finance minister had announced change in duty structure for a range of components consumed to manufacture mobile handsets, air conditioners (AC), refrigerators and electric vehicles.

Customs duty on key mobile parts like printed circuit board assembly (PCBA), display assembly and touch panel were raised by 10 percentage points.

While, for compressors and small motors - used in AC, refrigerator, washing machines and air coolers, among other appliances - were raised by 2.5 per cent.

While some argue, with no local supply chain existing and these items continue to be imported – mostly from China – higher duty on these will further increase production cost.

Data from department of commerce show, during 2018-19 mobile components worth over Rs 50,500 crore were imported from China, while for AC and AC parts the figure was Rs 4,000 crore.

According to Kamal Nandi, president of CEAMA, and executive vice-president of Godrej Appliances, said while the intention is good, it will lead to price escalation in the short run, on products like refrigerators, air conditioners, coolers, washing machines, air purifier and chest freezers.

Reduction of goods and service tax (GST) rates on ACs and large screen TV sets (from 28 per cent to 18 per cent) will help manufacturers and buyers absorb some of the increase in cost and spur demand.

“The government’s approach of levying higher duty on imported components to push players towards local manufacturing is somewhat flawed.

"Rather, it should facilitate setting up of a robust local ecosystem.

"Manufacturers are now under pressure and it is quite obvious that they will seek duty cuts”, said Navkendar Singh, research director, IDC.

However, some industry veterans said the companies are trying to influence the authorities by using the ongoing crisis as an excuse.

A group of electronics manufacturers, for example, are seeking removal of any bureaucratic or operational hurdles for incoming shipments.

This along with logistical incentives from the government, they argue, will help reduce their cost.

According to Avneet Singh Marwah, chief executive of Superplastronics – a brand licensee for Kodak and Thomson TV – they have asked senior finance ministry officials for fast tracking of component delivery, avoiding any hurdles at customs.

“A smoother transport corridor, along with priority release of shipments from Mumbai port, will reduce travel time by a couple of days.

"Given the rising cost and crunch in supply, it is imperative now that the government incentivize local manufacturers”, he said.

Sources said, finance ministry officials have given verbal assurance to manufacturers in favour of the proposal.

The Confederation of All India Traders (CAIT), which represents 70 million traders of the country, is lobbying hard against e-commerce giants like Amazon and Flipkart.

CAIT that has long been seeking stringent regulations on e-commerce players, has approached the prime minister.

In a letter, addressed to PM Narendra Modi, CAIT has urged for close scrutiny of imports of Chinese goods by e-commerce firms.

“Immediate steps are needed to provide a package to Indian traders and small industries to strengthen their production capacity so that flow of supply chain should not be disturbed”, it further demanded.

Photograph: Thomas Peter/Reuters

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Arnab Dutta in New Delhi
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