- February 16, 2017
- Mrinmoy Bhattacharjee
V P MAHENDRU
Though Budget 2017-18 provides incremental benefits for the manufacturing sector, more needs to be done by offering energy efficiency-specific incentives and facilitating LED lighting-centric SEZs to ensure a lasting impact
Each year, the annual Budget raises hopes all around. Once announced, it becomes clear that while a few expectations may have been met, others sometimes remain belied. Budget 2017-18 appears to have followed a similar pattern. To begin with, from the LED manufacturing industry’s perspective, the Finance Minister needs to be commended for the reduction in excise duty on manufacture of LED lights in India and reduction of import duties on input materials required to manufacture LED lights.
In this case, excise duty has been reduced to 6%, basic customs duty to 5% and countervailing duty is now 6% from the previously much higher rates. The lower rates will certainly act as an incentive of sorts not only for the manufacturers of LED lighting products but also enable the manufacturers to make these products available to users at competitive prices compared to the products imported from East Asian countries. For small-scale manufacturers across sectors with a turnover of less than Rs 50 crore, the Budget had additional good news, with tax provisions being lowered from 10% to 5%.
Besides this, the Government has done well to retain the overall customs duty at 10% on imports of finished LED products. The custom duty retention would be instrumental in helping the domestic LED lighting industry maintain its competitiveness against imports that could impact Indian manufacturers. The above measures would certainly boost the government’s ‘Make in India’ mission.
These announcements would have been good in themselves at any other time. Considering the conditions prevalent after the demonetisation drive, however, one sincerely believes more sweeping measures were called for to revive growth in the economy, which has been pegged back to the later half of this fiscal. Demonetisation has indeed fast-forwarded India towards a less-cash society and will bring dividends to our economy in the long run. But in short term, growth in the stalled sectors needs be revived.
The Budget could have been the ideal medium to stimulate our economy. Similarly, specific incentives were needed to power the country’s lighting industry, rather than simply lowering duties on some components, though these are welcome due to their incremental benefits. Nonetheless, one needs to remember that the government has set some stiff growth targets in the energy sector. These include 100% electrification of villages by May 2018, ‘Power for All’ by 2019 and other major goals in conventional and renewable energy.
Given their tight target timelines, these ambitious programmes will require contributions from every quarter to achieve them. Simply boosting power generation is not enough. It is also important to boost the contribution of the energy-efficiency segment in meeting tough targets. This is where select incentives such as interest rate concessions for companies manufacturing LED lights and allied components could play a critical role in ensuring that the country moves faster towards energy security by driving energy conservation.
The other request the government could have considered on priority was the establishment of SEZs (Special Economic Zones) for manufacturers in the LED lighting domain. SEZs could help manufacturers reduce their production costs, driving economies of scale. These factors are critical for the success of India’s LED lighting industry, which faces fierce competition from global quarters, particularly China. With Chinese companies receiving robust state subsidies, they can afford to price products much cheaper, as they have done for quite some time. Therefore, the Indian government should seriously consider the creation of SEZs for the LED segment of the lighting industry. ‘Power for All’ could then become a reality sooner rather than later.
As things presently stand, while the Budget will have a beneficial impact on the LED lighting industry, more remains to be done for the impact to be significant on this sector’s growth.
The author is chairman and managing director, Eon Electric Ltd. Views expressed are personal.