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Electronic Hardware Industry is generally positive about the principle policy decisions in the Union Budget 2005-06. “The clear focus on this sector is evident from the budget speech of the Finance Minister. And majority of the employment generation of 70 lac jobs is expected to be from hardware sector. A major step has been taken to bring all inputs for ITA-1 products at nil duty in view of zero duty regime faced by the industry” – said Mr. R.G. Deshpande, President, ELCINA. However, the other disability factors like CST and higher cost due to infrastructural issues are not compensated thereby forcing the local manufacturers to face zero duty regime without any positive compensation. The additional Customs Duty imposed to provide a level playing field does not achieve its objective.
A local component manufacturer will be subject to 4% CST which is not vatable, while a manufacturer-importer of electronic components will be able to offset the 4% additional duty against Excise duty, and to that extent the imported component will be more attractive for electronic equipment manufacturers. “This will make local manufacturing unviable if these disadvantages are not removed”, Mr Deshpande said. Abolishing CST for ITA-1 items has become an immediate need for the industry to survive, which faces 10% price cuts.
Another retrograde step relates to depreciation. The enhanced rate of depreciation allowed during the first year of installation of capital equipment has been disallowed for used imported equipment. This is a great disincentive because most fresh capacities are being created by importing used equipment from developed countries from where manufacturing is shifting to developing economies. This needs to be corrected immediately. To capture the future growth opportunities for the domestic manufacturing, composite VAT, excise duty reduction to 8% across the board and labour reforms are needed to be implemented without loosing time. R&D rebate of 150% is a welcome step to encourage local technology development.
Today, an interactive session was organized by CEHA (Council of Electronic Hardware Associations) with senior officials of Ministry of Information Technology where above mentioned industry views were expressed by all from Associations and their members. CEHA was formed last year with support of all Electronic Hardware Associations – including CETMA, ELCINA, MAIT & TEMA to work together for Indian hardware industry.
Before the session, CEHA meeting was held where the Convenership of the Council was handed over by Mr. R.P. Khaitan, President, CETMA, to Mr. R.G. Deshpande, President, ELCINA, for this year.
New Delhi, March 04, 2005
RAJOO GOEL, SECRETARY GENERAL, ELCINA
ELCINA Electronic Industries Association of India
ELCINA HOUSE, 422 Okhla Industrial Estate
New Delhi - 110 020, India
Tel: 26924597, 26928053 ; Fax: 26923440
Website: www.elcina.com
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