Manufacturers' Association for Information Technology (MAIT) which includes top laptop, personal computer (PC) and server makers such as Dell, HP, Apple, Lenovo and Asus is set to send its representation to the government on August 5, seeking an extension of at least six months for the implementation of new import restriction rules.
According to a notification sent by the Ministry of Commerce and Industries on August 3, computer manufacturers will now need a valid licence and would pay duty to import PCs, laptops, tablets, servers etc.
Exemptions on the licence will only be for up to 20 items per consignment, sent for the purpose of research and development, testing, benchmarking and evaluation, repair and re-export and for product development.
Speaking to Moneycontrol, Nitin Kunkolienker, President Emeritus of MAIT and Director, Electronics Product Foundation (EPIC) said, “We are seeking extension by at least six months on the implementation. Though the government has given time till August 31, no company works on one month supply time. There’s a forecast, supply chain planning of six months, companies place their orders accordingly with the suppliers.”
Kunkolienker added that if the government wants to make India a success in Production Linked Incentive (PLI) Scheme, they’ll need to promote manufacturing and resolve all the issues.
“One of the greatest challenges in India is finding lean manufacturing on the logistics and supply chain side, it’s unreliable. The ports are not so friendly as of now. Over and above if there’s one more layer added of getting an import licence then we are only making it more unfriendly,” he said.
Under the PLI Scheme for IT hardware, the cabinet has approved incentives worth Rs 17,000 crore for manufacturing laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices. This is now called PLI Scheme 2.0. The six-year scheme is expected to bring about incremental production worth Rs 3.35 lakh crore.
Meanwhile, Minister of State for Electronics and Information Technology Rajeev Chandrasekhar on August 4, stated that the companies will be given some time to transition, the details of which will be out soon.
Concerns raised
A senior executive of a top server manufacturer seeking anonymity said that the move is quite sudden and may not be a successful one if not done in a phased manner.
“It is quite a sudden move. Besides the laptops and desktops, it also covers the servers. You suddenly can’t just wake up one day and stop sourcing things from outside. It’s not possible. Certain ecosystem and timeline have to be created to transition into that. It has to be done in a phased manner,” the executive said.
According to Kunkolienker, the government has enhanced the limit of the PLI scheme to signal the companies to start manufacturing in India. While most of MAIT’s top members who account for 80-90 percent of the hardware production including laptops and PCs are definitely going to align with the PLI and manufacturing agenda of the government, the issue arises when the companies import products.
“Quite a few models don’t have the economies of scale for manufacturing in India. For instance, a high-end laptop with only 10,000 models getting sold a year, the company will opt for a licence. But the issue is getting a licence too is a bureaucratic and tedious process with various ministries and bodies involved in certifying. The cost of dealing with such transactions is high,” he said.
He added, “The government also needs to simplify these rules in the case of manufacturing of certain models and products. Not all products can be manufactured here, especially the high-cost and low volumes ones. These rules will need time to be implemented in phases, doing at once will defeat the ease of doing business."
Server manufacturing to get impacted
“Server manufacturing is just starting up in India. If you include everything under the same directive, it may not cut ice. The server manufacturing sector is so far behind a mobile device or a tablet, that it just doesn’t make any sense,” said the above-mentioned executive.
For instance, HPE recently announced its plans to manufacture high-volume servers locally, with an investment plan to make servers worth $1 billion over the next five years.
The executive added, “Let the PLI Scheme 2.0 come in place. Let the ecosystem mature over the next two years and let people start making servers in India. Once everything is in place, we can definitely start figuring out the import aspect of it and domestically fulfil all our requirements.”
Overall, industry analysts said, while they had expected this to happen to boost 'Make in India' initiative combined with the PLI Scheme, the immediate implementation of this can disrupt the industry in the near term if the companies fail to ramp up domestic production capacity quickly.
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