Consumer durable players take the CKD route to beat higher import duties

The Centre may have doubled import duties on high-end televisions and microwaves to encourage domestic production of these goods but manufacturers are in no mood to make higher capital investments.

Most players plan to bring in completely knocked down (CKD) components as these can be imported at zero duty.

MNCs like LG and Samsung and even domestic players like Mirc Electronics, Videocon, Intex and Godrej Appliances are not planning any additional capex as importing CKD kits from places like China and Taiwan will continue to be the norm for the industry. The ecosystem to support complete manufacturing of these durables in the country, is yet to develop, say players.

“Unless the entire ecosystem develops for manufacturing components like glass, LED lights and diffusers for making panels for televisions, it is not possible to have ‘Made in India’ television sets. Companies, which were importing SKD (semi-knocked down) kits before import duties were doubled, will now have CKD kits for making television panels as they attract zero per cent import duty,’’ says Jayesh Parekh, Business Head - Consumer Durables, Intex.

Customs duty on television sets have been raised from 10 per cent to 20 per cent while for assembled LED panels used in making television sets, it has gone up from zero to 7.5 per cent. This was done as part of the ‘Make in India’ campaign.

Components like specialised glass, which comprise 65 per cent of LED television panels, are still not manufactured in India.

“Making glass is the toughest part for television panels, and nobody has the capability to make it in India, as it requires huge investments with a long gestation period, which none of the durable companies are willing to undertake. Since India has an FTA (free trade agreement) with South Korea, some South Korea-based companies like Samsung and LG may benefit in terms of import of glass for making panels. But for the rest they will have no alternative but to either pay the additional tax or resort to assembling components,’’ observes KS Raman, former President, Consumer Electronics & Appliances Manufacturing Association (CEAMA).

“We will continue to bring in parts of the components or CKD units which have zero duty from places like China and Taiwan, since they have scale and cater to the world market. Capabilities have to be developed in India, but till such time panels for television sets will continue to get assembled,’’ said Sunil Shankar, Business Head - LED Panels, Mirc Electronics.

Vu Technologies, which makes ‘luxury’ televisions, relies entirely on imports and is already working on a new business plan which will involve setting up an assembly line for making televisions. “We now have to look at different options to set up a full assembly for CKD kits to manufacture high-end television sets here,’’ said Devita Saraf, CEO, Vu Technologies.

Stagnant categories Meanwhile, in the case of stagnant categories like microwaves, consumer durable companies will stay away from capex despite higher import duties. “Microwave is largely an imported category and will remain that way. Despite the increase in import duties, none of the companies are willing to invest in manufacturing, given the low volumes. Most of them, including us, will opt for assembly line operations since Magnetron, the heart of the technology for making microwaves, is only made in countries like China,’’ said Kamal Nandi, Business Head, Godrej Appliances.

Even MNCs like Whirlpool have no plans to invest in the microwave category. “Capex is not justified for microwaves since the category does not have enough scale to be made in India,’’ said Kapil Agarwal, Vice-President - Marketing, Whirlpool India.