Government's Make-in-India pitch fine, but ground reality's different: PC makers

BENGALURU: Even as Prime Minister Narendra Modi is raising the pitch for ‘ Make In India’ campaign, the world’s third largest PC maker, Dell, is struggling to use its manufacturing capacity in India to its full capacity — the reason being unfavourable conditions.

“If the country wants to get real benefits from local manufacturing, we need to revise the existing inverted-duty structure,” Alok Ohrie, Dell’s India MD, told this newspaper. India currently imposes a tax of 16% and a value added tax of anywhere between 4% and 12% depending on the state, on PCs and servers manufactured in the country. But the duty on imported PCs is a mere 17.42%, making local manufacturers unviable.

“It is not commercially viable for component manufacturing and we don’t have (local) sources where we can buy components from,” Ohrie said. Dell’s manufacturing unit in Sriperumbudur in Tamil Nadu has an annual manufacturing capacity of three million units, but, currently it is underutilised.




“We are trying to see how we can get some exports going from there, which will help us utilise that capacity. Based on what comes out of the ‘Make In India’ policy by the government, we will evaluate what’s in the best interest of the company,” he added.

And Dell’s not alone. S Rajendra, CMO at Acer India, said, “Apart from the invertedduty issue, demand for PCs is low. The lack of ease in doing business is one of the biggest factors that make manufacturing of electronic products unviable in the country.”

Acer has a manufacturing capacity of six lakh units a year in its Puducherry unit but Rajendran insists most manufacturing happening in India at the moment is PC assembly.

India imported an estimated $38-billion worth of electronics last year, while only about $19 billion worth of goods were manufactured here with minimal value addition.

“Indian manufacturers face various other challenges such as high cost of finance — there is 15% interest in India against 2-4% globally— and high power costs due to irregular power supply. These create a disability of about 20% for Indian manufacturers,” said Ashok Chandak, chairman at the India Electronics and Semiconductors Association (IESA).

India signed the Information Technology Agreement (ITA) with the World Trade Organisation in 1997, which forced the country to reduce import duties to zero on several electronic products including servers and desktops. The Modi government is known to be strongly contesting the updated ITA, which intends to include more product categories for zero import duty.

In the past year, successive central governments have taken various measures to boost local manufacturing — steps like setting up of nine electronic manufacturing clusters and two electronics incubation centers in the country.

The Centre has also set up a Rs 10,000-crore fund to give subsidies of 20-25% of capital expenditure costs to companies setting up manufacturing facilities in the country.

“While the government has approved many proposals, it is yet to start the disbursement, leading to prolonged delays. They need to focus on not just ease of doing business but also on the speed too,” Chandak said. In its recommendation for the 2015-16 budget, India Electronics and Semiconductors Association. has requested the Indian government to fill in the inverted-duty gaps, set up an electronics commission for quick policy implementation and provide the deemed export status to electronics made in India, giving them similar benefits as those granted to exporters.