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The Finance Ministry attempted to lure electronics and IT hardware companies to set up manufacturing units in the country.
The Finance Minister announced incentives for semiconductors industry with no Customs duty on plants and machinery. The Budget also increased outlay for IT manufacturing to Rs 100 crore in 2013-14 compared with Rs 5 crore in 2012-13. In addition, a company investing Rs 100 crore or more in plant and machinery between April and March 2015 will be entitled to deduct an investment allowance of 15 per cent of the investment. However, the industry said that more needs to be done to drive manufacturing.
‘why invest?’
“We feel that no one would import machinery unless it benefits the bills of material costing. If there is no commercial sense in manufacturing, then why would someone invest?” J.V. Ramamurthy, President, Manufacturers’ Association for Information Technology, said.
The prevalent rates of Countervailing Duty and Special Additional Duty for IT equipment result in an increase in the cost of a finished product that is manufactured in India, he said.
But India Electronics and Semiconductor Association said the steps outlined will boost this sector. “We also welcome the Rs 200-crore fund to be set up to help innovators scale up their inventions and develop products aimed for the masses,” Association President P.V.G. Menon said.
Deepa Doraiswamy, Industry Manager, Electronics and Security Practice, Frost & Sullivan, said: “Capital equipment typically accounts for 23-30 per cent of the fabs initial investment cost which places the importance of this budget announcement in good perspective.”
According to Guruswamy Ganesh, Vice-President and Country Manager, Freescale Semiconductor India, no Customs duty on import of plant and machinery combined with the 15 per cent investment allowance will encourage local manufacturing. Xerox India Director Rajat Jain said: “This would result in more investments.”
>ronendrasingh.s@thehindu.co.in
>venkatesh.ganesh@thehindu.co.in
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