The Preferential Market Access policy guidelines concentrate more on the domestic assembly of products, rather than on directly driving electronics manufacturing in India. However, the government believes that domestic assembly is the first step towards making India an independent domestic manufacturer of electronic hardware and components
By Nitasha Chawla
The government recently issued the Preferential Market Access (PMA) guidelines for desktop PCs, laptops, tablets, dot- matrix printers and smart cards, with an objective to give a fillip to the domestic manufacturing industry, and to put an end to India’s dependence on imports. However, the guidelines for all these products do not mandate that all the components that go into making these products have to be manufactured domestically. Therefore, the PMA policy will drive the growth of indigenous manufacturing only to a certain extent.
Let’s find out what the guidelines for each product mandate, in order to a product to be certified as ‘indigenously made’.
Desktop PCs and dot-matrix printers
The guidelines for the PMA policy for desktop PCs specify that out of ten inputs listed in the policy, which go into making a desktop PC, only two—switch mode power supplies (SMPS) and bare PCBs—are required to be manufactured domestically. Moreover, for the SMPS, the value of domestically manufactured components needs to be only 10 per cent in the first year, and must be increased to 20 per cent in the subsequent year. All other key inputs, like the hard disk drive, LCD monitor, processor, memory, keyboard, motherboard, mouse, etc, can be imported and assembled domestically.
The policy guidelines for dot-matrix printers state that 40 per cent value-addition is needed in the first year for the dot-matrix printer to be considered as an indigenous product. Here also, out of ten inputs, only two—SMPSs and bare PCBs—are required to be manufactured domestically.
The main PCB, one of the key inputs of a dot-matrix printer, has also been spared from 100 per cent mandatory domestic manufacturing. The policy mandates only 10 per cent of its components to be manufactured domestically in the first year, a figure that needs to be increased to 15 per cent in the subsequent year. All other parts used in a dot-matrix printer like cartridge motors and paper feed motors, the front control panel, home position/paper end sensors, main printer cabinet, etc, can be imported.
Laptops and tablets
For laptops to qualify as domestically manufactured, 25 per cent value-addition should be done in the first year. In the case of tablets, the amount of value-addition mandated is 30 per cent.
The policy lists ten main inputs which go into laptops. Of these, bare PCBs and the back cover have to be compulsorily manufactured in India. In case of the cabinet, motherboard and power modules, in the first year, the policy mandates only domestic assembly and testing. However, the value of domestically manufactured components used in the assembly of the motherboard and power module will be increased to 10 per cent in the second year and 20 per cent in the third year. Domestic manufacturing of cabinets will be made compulsory from the third year onwards.
In case of semiconductors (including chips and modules), at the moment, only design and assembly, testing, marking and packing (ATMP) activities have been made mandatory. However, this will be reviewed when India gets its own semiconductor fabs, which will enable manufacturing of chips.
Smart cards
There are two types of smart cards—contact and contactless. For contact smart cards, 30 per cent of domestic value-addition is compulsory in the first year, which will be increased to 45 per cent and 65 per cent in the second and third years, respectively. Of the four main inputs mentioned in the guidelines, only the plastic card body of the card has to mandatorily be manufactured domestically. Its key input, the IC chip module, can be imported. However, this will also be reviewed once India gets its own semiconductor fab and starts manufacturing chips.
For contact less or dual interface cards, 40 per cent of domestic value addition is compulsory in the first year, which will be increased to 50 per cent and 70 per cent in the second and third years, respectively. All other guidelines are the same as those for contact smart cards.
Is the PMA justified?
With the announcement of the PMA policy, the industry was hopeful of India taking a giant leap ahead with respect to manufacturing. But a close study of the guidelines for the five products reviewed here reveal that assembly is all that the government expects the industry to indulge in. Only domestic manufacturers of components like SMPS and bare PCBs may see some demand.
However, according to a senior government official, making it mandatory for domestic manufacturers to assemble electronic hardware locally is the first step towards making India a manufacturing hub. “At present, Indian manufacturers do not even have assembling capabilities except in some cases like desktops, dot-matrix printers, etc. We want companies to at least start off with assembling. A good amount of investments are also required to establish assembly units for products which were being imported until now. In such a scenario, making manufacturing compulsory in the first phase itself would be too harsh on the Indian industry. That is why, through the PMA policy, we have made sure that the industry gets the required push to develop their capabilities and gradually start manufacturing domestically.”
Sanjiv Narayan, managing director, SGS Tekniks Manufacturing Pvt Ltd, also echoes the same view. According to him, with the release of the PMA policy, the government has indicated that it is serious about boosting the local manufacture of electronic hardware and components. “Once the local assembly starts, there will be a rise in demand for indigenous products which will, in turn, put pressure on industry to undertake domestic manufacturing. This rise in demand will drive investments in the electronics market. Therefore, in the next five years, we can see India becoming independent in the manufacture of electronic hardware and components, if the policy is implemented in the right way and reviewed from time to time to address the issues faced,” he says.
