Indian LED industry is suffering due to an unfavourable duty structure, lack of standards and dumping of cheap products by Chinese, Korean and Taiwanese manufacturers
By Kartiki Negi
Wednesday, May 14, 2014: India’s huge reliance on imported LEDs and LED lighting products poses a critical challenge to the domestic market. While local manufacturers are discouraged by insufficient demand in India, importers, traders and assemblers prefer to import LED lighting products due to budget constraints and to avail the tax benefits conferred on imports. This is also creating quality issues, as the market is being flooded by cheap LEDs and LED finished products from China, Korea and Taiwan. Industry experts are of the view that since these cheap and low quality products don’t have a long life, customers are wary of shifting to this energy efficient technology, which is currently more expensive than conventional lighting products. Says Arun Gupta, global CEO, NTL Lemnis India Pvt Ltd, “Sub-standard imports is a big threat and the government has to ensure that policies are put in place so that India does not become the dumping ground for low-quality, cheaper imports. The poor quality of products can cause immeasurable harm to the adoption rate of LEDs in the country.”
Adds Ramadas Patil, head, SSL business, Moser Baer Pvt Ltd, “Indian industry is facing a lot of trouble due to import of low quality LED finished products. These low cost but inferior quality products are confusing customers, which is hampering the domestic market. By limiting these imports, the government will be boosting the Indian LED market by creating conducive circumstances for the domestic manufacturing ecosystem.”
Nevertheless, the high scale of growth anticipated in the next three to five years, coupled with the incentives offered for indigenous manufacturing under various new government policies such as the Modified Special Incentive Package Scheme (MSIPS) and Preferential Market Access scheme (PMA), is expected to offset these constraints.
How inverted duty structure affects domestic players
The Indian LED industry is suffering due to an unfavourable duty structure that makes Indian manufacturing uncompetitive, not only in the domestic market, but in global markets too.
Under the inverted duty structure, the import duty on LED finished products is zero per cent; however, a duty is being imposed on the parts or components used in manufacturing these lighting products. Due to this, domestically produced goods cost more than their imported counterparts.
“What is happening is that there are very good Chinese manufacturers who are making LED lights in large volumes for the European and US markets. Their rejects are filtering into the Indian market, which is a very dangerous trend,” says Ajay Goel, CEO, Goldwyn Ltd.
“We must stop the import of LED finished products in order to stop China and Korea from dumping their garbage in India. This activity is adversely affecting the Indian industry that includes both manufacturers and skilled manpower. Moreover, the country’s foreign exchange reserves are also being adversely impacted,” says Sanjay Choudhary, vice president, sales and marketing, Syska LED.
Curbing imports is not the only solution
Though we all know the devastating effect these imports have on the Indian LED industry, India is certainly not in a position to dictate terms as yet. Since the government has an international commitment to the World Trade Organisation (WTO) and other free trade agreements (FTAs), it will not be easy for it to roll back these duty structures, in view of the negative global impact such a move may have.
“Stopping imports will not save the industry but, at the same time, it is very important that we have our standards, so that whatever products are imported into the country have the approval of the Bureau of Indian Standards (BIS). Once we have this in place—we already have notifications on the subject—the poor quality products from elsewhere will not come into the Indian market,” says Ajay Goel.
Speaking along the same lines, Arun Gupta says, “There has to be strict adherence to quality standards and mechanisms have to be put in place to ensure that these are met. Till now, there has been no mandatory requirement for the industry to follow quality standards. BIS has now decided that the industry should follow certain parameters, which will be helpful to curb cheap imports. The move will immensely help local manufacturing and also improve the quality of products entering the Indian market.”
Reportedly, BIS has come out with 12 regulations and has submitted a draft about them to the government for their implementation. These are yet to be approved. These regulations are based on several parameters such as life of the product, quality, failure period, recycling process, etc.
Slamming the government, Sanjay Choudhary says, “We do not understand why the government is waiting for the industry to pursue it to formulate some policies on standards. By now, the government should have made these standards mandatory, which, in turn, would have boosted the manufacturing ecosystem. We cannot entirely stop imports unless we are self-sufficient and thus we need to promote local manufacturing so as to be in a position to curb the imports.”
Apart from standards, the government must come up with some additional boosters to encourage domestic manufacturing. “LED manufacturers should be given concessions so that more and more people are motivated to take up local manufacturing. However, this alone will not help; duty structures must be amended as well. These measures, coupled with standards, will help in bringing the price of LED products down with right quality and Indian players will be able to compete with Chinese manufacturers,” says Ramadas Patil.
Adds Sanjay Choudhary, “The government must change its policy. Rather than charging duty on imported components, it must charge duty on the imported finished products.”
