New Delhi, Aug. 4: The government plans to increase the duty on electronic goods and components to reduce its rising import bill.
India may also levy an additional 5 per cent duty on imported electric gear, which is currently taxed at 21 per cent, to boost local manufacturers and provide them a level-playing field.
Top finance ministry officials said electronic goods were the third most imported item, valued at $32 billion in 2012-13.
If the current trend persists, trade analysts see the import of electronic gears surpassing oil imports by 2020 and can be as high as $300 billion.
“We cannot afford this. India is one of the biggest markets for these goods and manufacturers need to understand that we cannot allow all our forex resources to be drained away to prop up manufacturing in Taiwan and Norway,” officials said.
A plan to encourage domestic manufacturing will be put on the fast track and duty hikes will be announced soon. Such an action is increasingly necessary because the difference between dollar spending on imports and earnings from exports and foreign investment flows has been steadily widening, pulling down the value of the rupee.
The aim is to curb imports of fully built mobile phones or laptops, which the government hopes will force manufacturers to assemble them in the country. Duties on components, too, will be raised progressively to force some or most manufacturers to shift base to India.
Officials said this also prompted India to turn down US vice-president Joe Biden’s demands of signing a trade pact, called ITA-2 (information technology agreement-version 2), made during his trip to New Delhi last month. ITA-2 would make India a signatory to a deal, which allows duty-free trading in IT hardware, including tablets, iPhones, mobiles and flat television sets.
At present, mobile phones, computer processors and hard disks attract an import duty of 6.03 per cent, while iPads, laptops, computers and computer printers a levy of 16.85 per cent. iPods, video games and gaming consoles are imported with a duty of 28.85 per cent.
In many cases, the duty is in the nature of countervailing duties, with the basic customs duty at zero per cent.
Finance ministry officials said barring cases where duty cuts had been given as part of free trade agreements, such as with Thailand or the Asean, India was in a position to raise the duties.
A structured tax set-up, which imposes higher taxes on finished capital goods and electronics and lower taxes on components, will be brought in to engage more domestic manufacturers. Taxes will be lower for products made in India compared with those having less local components.
Power plant parts
India also wants to manufacture more equipment for its power plants. It will be tweaking the policy to force Western gear makers such as Siemens and Babcock as well as Chinese giants such as Shanghai Electric to either make the components here or face higher taxes.
Top finance ministry officials said machinery imports last year were over $30 billion.
Inter-ministry panels have been warning against Chinese imports flooding local markets on account of factors such as the artificially depreciated yuan, tax advantages, subsidies, cheap government loans and absence of labour laws in China.
According to the recommendations of an inter-ministry panel for the 12th Five-Year Plan, “The capital goods industry can be considered as the ‘mother’ of all manufacturing industry and is of strategic importance to national security and economic independence. While it may be preferable from the user industry’s point of view to allow the import of capital goods at lower costs, this will result in over reliance on other countries for key strategic inputs.”
Source:-www.telegraphindia.com
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