Consumer durables makers want the Government to abolish or at least reduce customs duty on imports of components that are used in manufacturing of refrigerators, washing machines, air conditioners and microwaves in the upcoming Budget.

Such a move, they say, will boost the Government's agenda of 'Make in India' since it will lower prices of made-in-India products, making them more competitive compared to imported products.
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"The Government must reduce customs duty on parts and components of consumer appliances from current 7.5-10 per cent to zero in order to make manufacturing in India more competitive than finished goods imports from countries with free trade agreements," said Kamal Nandi, business head and executive vice president, Godrej Appliances.

The current duty structure goes against the Government's vision of 'Make in India', he added.According to Consumer Electronics and Appliances Manufacturers Association (CEAMA), which represents the roughly Rs 45,000 crore industry, the excise duty on LCD and LED panels, used in making televisions, mobile phones and tablets, should be abolished. Customs duties on components like magnetron, used for producing microwave ovens, and pre-printed steel sheets and other essential parts used in making air conditioners, washing machines and refrigerators need to be lowered as much possible to encourage manufacturing of these appliances in India.

"A reduction in the customs duty on OLED modules and import of parts for manufacturing air conditioners, washing machines and refrigerators is needed," said Manish Sharma, president of CEAMA, and managing director, Panasonic India and south Asia.

At present, most high-end consumer durable products and appliances are imported as finished products because of the non-availability of components in India. According to a study by Corporate Catalyst India, only 30-35% of electronic component required for manufacturing are available locally; semiconductors, a critical component in many electrical appliances, are almost entirely imported.

Similarly, the steel finishes that are used in refrigerators are not available locally, nor are energy-efficient compressors, motors, and some blowing agents and electronic components.

Almost 1.5 to 2 million flat panel TVs in a 6 million unit-strong market are imported annually; the rest, which are assembled in India, have to make do with imported parts. According to industry estimates, almost 65-70% of parts used in locally manufactured white goods come from markets such as China, Japan, Indonesia, Malaysia and Taiwan. Also, high-end products in these categories are completely imported from abroad since manufacturing them locally is not viable.

The same goes for categories such as laptops, tablets, micro-wave ovens and digital cameras, which are all imported as completely built units from abroad.

South Korean consumer electronics company Samsung has said it manufactures all its consumer electronic products locally, barring high-end refrigerators, ultra high-definition TVs, and microwave ovens. However, components for these are imported.

After a long dull period, the festive season proved to be lucrative for the consumer durables sector as it saw an upsurge in sales, driven by higher consumer confidence and a stable rupee, said Sharma. But a recent rollback of the excise duty has led to an increase in product prices passed on to the consumers, thereby adversely impacting their sentiment and leading to a subsequent drop in sales, he said. "We want a reduction in the excise duty to give an overall boost to the sector," he said.

According to CEAMA, introduction of good and services tax (GST) will decrease compliance burden for businesses as well as reduce paperwork and create a seamless pan-India market and also bring down the total incidence of taxes by eliminating cascading effect of taxes on goods and services.

"The budget needs to remove the inefficiencies in the system like inverted duty structures to pave the way for an efficient GST," CEAMA said in a statement.

On the other hand, special addition duty pushes up duty costs for the manufacturing sector, along with countervailing duty to 17% compared with output excise duty of 12%. This is not aligned with the 'Make in India' initiative as it will discourage multinational companies from manufacturing in India, CEAMA noted.

The government, CEAMA said, also needs to promote local manufacturing of components like electron gun, metal parts which are used in manufacturing televisions, and compressors, and electric motors and plastic components for household appliances such as washing machines, refrigerators and air conditioners.

"The Finance Minister needs to remove anomaly in the inverted duty structure for the benefit of manufacturing in India. We hope this budget boosts the growth of consumer durable manufacturing in India with excise duty concession of two per cent withdrawn till the implementation of GST," said an LG official.

"All sectoral indicators have shown that growth has stifled the appliance industry. The increase in excise duty has added to our woes. What we seek from this budget are measures that will stimulate demand," said Shantanu Das Gupta, vice president (corporate affairs & strategy, Asia South) at Whirlpool India.

Source:- business-standard.com