- February 22, 2017
- Mrinmoy Bhattacharjee
The domestic electrical and lighting industries have responded in a myriad ways to the Union Budget 2017-18 tabled by Finance Minister Arun Jaitley in the Parliament, on February 1, 2017. While the players foresee several positive triggers emanating from the Budget, their response is equivocal to the proposal of duty cuts on LED input materials.
Focus on Rural, Infra: Growth Enablers
The Budget’s focus on rural development and infrastructure upgradation will lead to long-term economic growth, says Sunil Misra, director general of Indian Electrical and Electronics Manufacturers’ Association (IEEMA). “The increase in allocation in the rural sector, such as Mahatma Gandhi National Rural Employment Guarantee Act (MNERGA), providing one crore housing for poor, thrust in Pradhan Mantri Gram Sadak Yojna (PMGSY), and the government’s commitment to electrify all villages by May 2018, will result in an increase in domestic demand.” He adds that the total outlay of Rs 3.96 lakh crore in infrastructure sector is “positive” news. “The government’s target of putting up 3,500 kms of railway lines, modernisation of railway stations through private partnership, and new metro rail policy will benefit the domestic electrical industry.”
Echoes Nitin Chalke, managing director of Indian operations of global power management giant Eaton Corporation, “The stimulus given to agriculture, rural development, affordable housing, and infrastructure sectors holds good potential for a higher growth trajectory – which also creates opportunities for our electrical, hydraulics and vehicle businesses.”
Plethora of ‘Power’ful Boosters
Increased allocation to Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) and Integrated Power Development Scheme (IPDS) will provide a much needed impetus to the sector, says IEEMA president, Sanjeev Sardana. “Tax relief of 5% for companies below Rs 50 crore in turnover is welcome. This will boost the morale of the industry as 80% of electrical equipment industry is under MSME.”
Pro-growth Budget to Percolate to LED Sector
Electric Lamp and Components Manufacturers’ Association of India (ELCOMA) has termed the Budget as “highly positive”. Its president Rakesh Zutshi says, “The Budget has introduced many path-breaking provisions that are likely to achieve considerable growth for the lighting sector. We expect that gains of the economic development achieved by the government on the back of the growth-oriented Budget will percolate to the fast developing LED sector as well.”
Some Hits, Some Misses
Indian Society of Lighting Engineers (ISLE) president, Dilip Kumbhat has hailed the Budget as one that targets the growth of energy-efficient lighting through LED and the resultant power-saving potential at the national level. However, he points out, “The Budget has retained the 10% Customs duty on import of finished LED products, but the lighting industry was expecting a 20% customs duty on it as a supportive measure for the local industry to grow in LED market and help ‘Make in India’ programme. In fact LED drivers/SMPS, which even if imported as components for LED lamps, should have been charged with custom duty at par with finished product to promote indigenous manufacturing. After all, we have all the know-how and technology for these items.”
Kumbhat adds that retaining the existing level of 10% for finished product import, coupled with a cut in excise and import duties on input materials used to manufacture LED lamps will “definitely” support the domestic lighting industry. “The trend will be, from now on, to provide value addition in LED products by importing the components at cheaper costs, and domestic lighting manufacturers will flourish. To accelerate the trend in a big way, the concessional excise duty of 6% could have been made as zero duty.”
“Obviate” Local Value Addition, Sourcing
Sounding a cautionary note, Rajoo Goel, secretary general, Electronic Industries Association of India (ELCINA) says, “In case of LED lights, fixtures and LED drivers and its parts, Basic Custom Duty (BCD) has been prescribed at 5% and Countervailing Duty (CVD)/Excise at 6%. Almost all mechanical and electromechanical parts, as well as LED drivers for LED lights are manufactured in India in good numbers and were subject to 10% BCD. Reduction of BCD to 5% on these would result in raising imports of these parts.”
Goel adds that inputs of LED drivers have been brought under 5% BCD against the present zero BCD as all are ITA bound. While this could help in enhancing local sourcing of components such as capacitors, resistors, PCBs and connectors, imports are likely to happen without actual user condition to avoid the 5% BCD. The objective of greater local value addition and local sourcing of inputs for drivers would thus be obviated.”
Agrees Praveen Sood, chairman of New Delhi’s solar-based LED lighting firm Regnant Energy Solutions, “The Budget does not provide impetus for electronics hardware value addition. This will not result into ‘Make in India’, but assembly in India.”
“In Our Favour”
Lauding the government’s decision to cut excise and import duties on input materials used to produce LED lamps, Rambo Zhang, India head of China-headquartered lighting MNC Opple Lighting says, “This is a decision that has been in our favour. Such an effort by the government will encourage manufacturers to produce quality products along with supporting the ‘Make in India’ initiative.”
He adds that the government’s proposal to retain the overall 10% customs duty on the import of finished LED products will support domestic industry. “We feel that the value addition in LED products by importing the components will surely increase, and this in turn will boost the development of domestic LED manufacturers.”
Rambo adds that reduction in excise duty to 6%, customs duty to 5% and CVD to 6% on all parts of LED, including lights, fixtures and LED lamps, is really an encouragement for the company. “Indian customers are more and more concerned about the efficiency of light. They are also keen on looking for system solutions and smart lighting. All these progressions will allow us to expand our presence in the country with our extensive range of products. India is a place where innovation is appreciated and recognised in a strong manner. We simply feel with these announcements, Opple will reach great heights.”
“Opportunity in Disguise”
The Budget’s big announcement is the proposal of levying 5% basic customs duty on all parts and input components used in manufacturing of LED light fixtures, including LED lamps, says Puneet Dhawan, senior vice president and business head for lighting business at the homegrown electrical and lighting major Orient Electric. “While it will lead to costlier LED lighting products, we believe that this may be an opportunity in disguise for local manufacturers who excel in electronics and LED sources, which is in line with the government’s plans to make India a global electronics manufacturing hub. We have a fully integrated competence centre which focuses on electronics and design of drivers for PCBs, which gives us an edge in providing customised solutions,” he avers.
Dinesh Aggarwal, joint MD of Japan’s Panasonic-owned Anchor Electricals Pvt Ltd says that the proposal to supply 7,000 railway stations with solar power will not only boost energy consumption, but also help the government achieve the goal of total renewable capacity of 175 GW by the end of 2022.
Adds Nidhi Modi, executive director of New Delhi-based RAL Consumer Products Ltd, owner of MITVA solar off-grid brand, “Solar power keeps on being the government’s concentration point this year, with the spending split being Rs 3,361 crore for solar energy and just Rs 408 crore for wind. The 2017-18 spending allotment to the Ministry of New and Renewable Energy of Rs 5473 crore has not seen a huge spike from the distribution in 2016-17. The Budget likewise declared support for the second period of solar-based park advancement for an extra 20,000 MW limit and the driving of 7,000 railroad stations with solar energy power, both of which were at that point in the offerings.”
MITVA, she informs, is venturing into the rooftop solar range from the existing off-grid portable solar products. “MITVA is one of the fastest growing solar brands in India and we offer the best quality solar products at affordable price. So for us the procurement expenses of solar panel modules will assume the essential part to our business benefit and brand promise. On the assembling front, the key detract from the 2017-18 spending plan is the decrease of basic customs duty to nil for tempered glass used in the manufacture of solar cells, panels and modules and the reduction of CVD from 12.5% to 6% for parts used in the manufacture of tempered glass which is used in solar PV cells, modules, etc.”
Assuring GST, Demonetisaton Limited Fallout
Saibal Sengupta, CFO, Usha International Ltd says, “There was no mention of a firm date for GST rollout. However, the very fact that indirect taxes, prima facie, have been largely kept untouched coupled with the heightened efforts on finalisation of the Model GST laws and acquainting the trade and industry with the revised procedures, only reassures of a strong government will for rolling out GST sometime around Q1’18.” With the assurance that demonetisation impact will not spill over to next fiscal, he feels that it brings a lot of positive vibes. “But, the effects are yet to become visible in tangible terms,” he adds.