NEW DELHI: India is considering the imposition of higher import duties on consumer durables such as televisions, washing machines and refrigerators to promote local manufacturing, buoyed by the success of such a measure in mobile phones under the phased manufacturing plan (PMP). The government feels that India is such a big market that these products should be made locally.
“There are suggestions that consumer durables, like electronics and telecom, should be brought under the phased manufacturing plan (PMP) and import duties be raised on some finished products,” a senior government official told ET.
Such a move would appear to reverse the policy of lowering trade barriers and may lead to higher prices of goods but is in line with the government’s Make in India initiative, which is aimed at promoting manufacturing, creating jobs and raising incomes.
A panel chaired by the cabinet secretary is looking at ways to reduce India’s import dependence.
India imported nearly $2 billion of finished televisions, washing machines, refrigerators, vacuum cleaners, digital cameras and mixer grinders in FY18. TV imports amounted to Rs 5,000 crore ($730 million at current levels), nearly a 10th of the total domestic market. Moreover, these imports were rising at a fast pace, up 35% in FY18.
Local companies want 20% import duty
The consumer durables and home appliances industry has been lobbying for doubling this to 20% on imported products.
The government raised tariffs on goods such as mobile phones, phone components and some fruit juices in the February budget. Mobile phones currently attract 15% import duty. India had imposed customs duty on smartphones from July 1, 2017, and subsequently raised it in the budget.
“Increasing the basic customs duty on consumer durables may give a boost to local manufacturing and it may also address the issue of inverted duty structure,” said Rahul Shukla, executive director, PwC, referring to the duty on the finished product being lower than on parts. “However, apart from tax or duty intervention, a more comprehensive policy to incentivise focus sectors should be contemplated in conjunction with simplification of compliances further and convergence of state and central government as a single window.”
PMP is aimed at boosting local production of mobile phone handsets by providing tax relief and other incentives on components and accessories used for devices.
About 120 local handset manufacturing factories were set up in the last four years under this plan. India is now the second largest mobile phone producer in the world after China, according to the Indian Cellular Association (ICA).
The government feels a similar success should be possible in the case of consumer durables and higher import duties on fully imported goods could be the first step.
Source: economictimes.indiatimes.com