The biggest challenge is that the price of manufacturing the components in India becomes much higher than that of sourcing them from China.
Industry leaders have added that the component manufacturers must be protected with tariff barriers to grow the domestic market and vendor investment in the consumer home electronics segment. It has been observed that Original equipment manufacturers (OEMs) will play a crucial role as their investments will develop the supply chain system for the home-grown market, ultimately decreasing the product’s cost and making it internationally competitive.
At the CII Consumer Electronics & Durables Summit 2024., the industry leaders, including Kamal Nandi, Business Head & Executive Vice President at Godrej, said that vendors need protection from high duties and their confidence needs to be boosted for more significant investments. Pointing out the scenario with refrigerator compressors, there is a capacity of producing 18 billion in the country, but the nation imports them, while the market is only 14 billion. Indigenization is only possible when a country can utilize its total capacity. The biggest challenge is that the price of manufacturing the components in India is much higher than those sourced from China.
Speaking of the duty structure in the industry, the peak rate is 20 percent, but the BCD on mobile phones, chargers, and printed circuit board assemblies (PCBAs) was reduced to 15% in the 2024 Union Budget. Most electronic goods are taxed at around 18 per cent. The Budget 2024 extended duty benefits on components like open-cell TV panels, magnetrons, and BLDC motors. It also extended concession duty on inputs used to manufacture LED drivers, moulds, tools, and dies until March 2026.
Sundaresan Narayanan, Airconditioning & Refrigeration Ltd Managing Director at Carrier, believes that it is imperative to look at the scale carefully while boosting localization of components in the country. “Anytime that we are trying to localize or have local manufacturing of a highly technical product like a compressor, which is the heart of the air conditioning system it is important that we get scale and I’m confident that India is at an inflexion point where we are going to see the scale coming up very fast,” added Narayanan.
China’s manufacturing capacity is ten times more than India’s, which adds an advantage for the nation to build components at a large scale at a very competitive price. Atul Khanna, vice president at LG Electronics, also believes that decreasing the import duty is hugely crucial, but at the same time, economy of scale is also important, or else there could be a lot of fiscal implications and additional challenges for the Indian manufacturers.
