Key features of Budget 2023-24 announced by Finance Minister Nirmala Sitharaman on 1st February this year are highlighted below, along with the reactions from the industry
Presenting the Union Budget this year, when Finance Minister Nirmala Sitharaman announced the adoption of Saptarishi (seven priorities) to guide India through the Amrit Kaal, all of the electronics industry was hoping for a helping hand too. And why not? The electronics and tech markets are still reeling under the Covid-19 pandemic-induced downfall.
Hence, the government’s decision to eliminate import duty on the camera lens and components was taken in good stead, as it will benefit mobile phone manufacturers in India. Electronic Industries Association of India (ELCINA) believes that such exemption should be extended to all other electronic product segments that use camera modules and electronic components.
But before going into the nitty-gritty of it, let’s come back to square one and look at the major points of the Economic Survey and Union Budget 2023-24, with an eye on the Electronics System Design & Manufacturing (ESDM) sector:
Positive steps
The industry associations have welcomed the following steps announced in the Budget:
Removal of duty of camera lens of 2.75%
Removal of duty on inputs to parts of connectors—palladium tetra amine sulphate
Reduction of BCD on parts of the open cell of the TV panel from 5.5% to 2.75% (including SWS)
Continuation of customs exemption notifications, which were facing the sunset on the 31st of March 2023, for another year
Customs duty exemption for the import of machinery required for the manufacture of lithium-ion cells for batteries used in EVs
Reduction of BCD on specific parts used in the manufacturing of television sets to 2.5%
Reclassification in HS Codes 8517 and 8524 for flat panel display inputs
Relief on customs duty on import of certain parts used in the manufacturing of mobile phones
Rectification of inverted duty structure to encourage manufacturing of electric kitchen chimneys
Pratik Kamdar, Co-founder of Neuron Energy, a player in the battery industry remarked: “The Customs Duty exemption on capital goods and machinery to manufacture lithium-ion will be a facilitator for the country to transition to sustainable and eco-friendly mobility. The exemption will have a domino effect on the overall sector with the over substantial decrease in the overall cost of the finished products, wherein the battery packs are likely to reduce by 5% coupled with lower initial investments. Additionally, the vehicle scrapping policy will also be beneficial if the old vehicles are replaced by electric vehicles. This will further aid in the country’s vision of mass EV adoption by 2030.”
Gaps
Notwithstanding the beneficial steps announced on February 1, the Budget left many long-standing demands unfulfilled, despite repeated requests put up by industry bodies and individual companies.
According to the Chairman of India Cellular & Electronics Association, Pankaj Mohindroo, “A high-performing sector’s genuine requests have not been addressed. These could have provided a significant impact on competitiveness leading to better exports, arresting the grey market and boosting revenue.” He pointed out the below-mentioned issues:
Capping of BCD on import of high-end mobile phones could have arrested the burgeoning smuggled market, which has crossed ₹120 billion, in 2023. This measure would have boosted government revenue, reduced smuggling, ensured fair trade, and helped build legal businesses in India.
Removal of input duties on Resin, Mesh, Sponge, Film, Gasket, Logo, Cover Tape, and Adhesive Tape from 8.25% – 16.5% to zero level was essential to promote the manufacturing of a very critical vertical—Mechanics. But the Budget didn’t provide the needed relief in this direction.
Input duties of 2.75%, the duty imposed in the previous Budget on the many inputs of PCBA, inputs of connector, and inputs of camera module were not removed.
Removal of duty on certain parts of the chargers would have provided the huge charger manufacturing industry with a competitive edge.
The 50% increase in GST from 12% to 18% has dealt a very cruel hand to this high-performing industry, which kept the nation’s economy moving during the Covid pandemic.
The Secretary General at ELCINA, Rajoo Goel, noted the Finance Minister’s announcement to reduce customs duty on parts of open cell of TV panels to 2.5% from 5% earlier. “All this will create demand for electronics hardware and create jobs as well in the electronics industry. The Finance Minister has laid a lot of emphasis on skill development for green energy products, drones, robotics, and IoT. All these are positive developments for the electronics sector,” commented Goel.
ICEA opined that while the industry had met the 2021-22 manufacturing target of ₹2,750 billion, we will fall short of the manufacturing target of FY 2022-23 because of domestic demand shrinking in 2022-23. Mohindroo added that, competitiveness is the key to both buoyant domestic demand and export.
Table 2
8524: FLAT PANEL DISPLAY MODULES, WHETHER OR NOT INCORPORATING TOUCH-SENSITIVE SCREENS
S. No.
Previous HSC
Description
Revised HS Lines (Finance Bill 2023)
Description
1
8524 11 00
Of Liquid Crystal
8524 11 10
For the goods of sub-heading 8471 30 or 8471 41
8524 11 20
For the goods of sub-heading 8517 13 or 8517 14
8524 11 30
For the goods of sub-heading 8528 72 or 8528 73
8524 11 90
Other
2
8524 12 00
Of organic light-emitting diodes (OLED)
8524 12 10
For the goods of sub-heading 8471 30 or 8471 41
8524 12 20
For the goods of sub-heading 8517 13 or 8517 14
8524 12 30
For the goods of sub-heading 8528 72 or 8528 73
8524 12 90
Other
3
8524 19 00
Other
8524 19 10
For the goods of sub-heading 8471 30 or 8471 41
8524 19 20
For the goods of sub-heading 8517 13 or 8517 14
8524 19 30
For the goods of sub-heading 8528 72 or 8528 73
8524 19 90
Other
4
8524 91 00
Of liquid crystals
8524 91 10
For the goods of sub-heading 8471 30 or 8471 41
8524 91 20
For the goods of sub-heading 8517 13 or 8517 14
8524 91 30
For the goods of sub-heading 8528 72 or 8528 73
8524 91 90
Other
5
8524 92 00
Of organic light-emitting diodes (OLED)
8524 92 10
For the goods of sub-heading 8471 30 or 8471 41
8524 92 20
For the goods of sub-heading 8517 13 or 8517 14
8524 92 30
For the goods of sub-heading 8528 72 or 8528 73
8524 92 90
Other
6
8524 99 00
Other
8524 99 10
For the goods of sub-heading 8471 30 or 8471 41
8524 99 20
For the goods of sub-heading 8517 13 or 8517 14
8524 99 30
For the goods of sub-heading 8528 72 or 8528 73
8524 99 90
Other
In a post-Budget session conducted by ELCINA, long-term and enhanced support for components manufacturing under PLI and the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) was recommended. The association also stated that the EMS sector must be included under the SPECS scheme to provide subsidies against capital investments, as it will hopefully give the required thrust to value addition and boost electronics manufacturing in all segments.
Some industry players suggested bringing Service Linked Incentive Schemes, on the lines of Production Linked Incentive (PLI) Schemes, to improve the workflow. Going forward, deeper digital and Internet of Things (IoT) penetration and the ever-increasing impetus on smart cities and robotics will boost the industrial and automated electronics sector in Industry 4.0. Also, the PLI scheme is expected to assist more domestic players to achieve economies of scale in production through localising. In turn, it will magnify India’s role in the global value chain and enhance export competitiveness. What remains to be seen, though, is the effective implementation of the initiatives announced for India’s Amrit Kaal.
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