The Central government may not extend the policy of zero customs duty on open-cells for LCD/LED panels used in televisions. Television makers were hopeful of a temporary extension, at least till the end of December, to see them through the festival season. Sources said the government is keen on incentivising local manufacturing.
“The current zero customs duty regime for open cells will end on September 30. The idea is to enable TV makers to become self-reliant by sourcing these components locally. Hence, we are not keen to give an extension,” said an official.
The open-cell is a critical component in the manufacture of television sets. At present, there is no local manufacturing of open cells in India. The entire component is imported from markets such as China. These raw open cells are imported and then assembled in India for use in television sets.
Currently, the zero customs duty is applicable for open cells (15.6 inches and above) used in the manufacture of Liquid Crystal Display (LCD) and Light Emitting Diode (LED) TV panels.
Hoping for a reprieve
Imposition of customs duty would lead to an immediate hike in prices of televisions. Television makers told Moneycontrol that even a three-month extension till December end would help them see festive season sales through.
“If we are forced to pay import duty from October onwards, there will be an immediate price increase by 3-5 percent for the finished goods. This would be a dampener because we are slowly seeing some revival in pent-up demand, which will be stalled if there is a price increase,” said the head of the home appliances division of an electrical goods firm.
LED TVs are one of the largest segments under the Appliance and Consumer Electronics domain, accounting for a volume of almost 15 million units, with an estimated sale value of almost Rs. 40,000 crore.
Not quite atmanirbhar
Consumer appliance firms had requested the government for an extension because open-cell manufacturing in India is still at a nascent stage.
In September 2019, the Ministry of Finance had said open-cells for LCD/LED panels will not attract any customs duty. The ministry had said that it would be valid till September 30, this year, after which local manufacturing of open cells could be incentivised.
In her February 2020 budget speech, Finance Minister Nirmala Sitharaman said that it has been observed that imports under Free Trade Agreements (FTAs) are on the rise.
“Undue claims of FTA benefits have posed a threat to the domestic industry. Such imports require stringent checks. In this context, suitable provisions are being incorporated in the Customs Act. In the coming months we shall review Rules of Origin requirements, particularly for certain sensitive items, so as ensure that FTAs are aligned to the conscious direction of our policy,” she had said.
Televisions are among the categories where FTAs are being used in a small way to source products/parts from outside. This will also be reviewed.
Sitharaman also said that customs duty exemptions shall be comprehensively reviewed by September 2020, to ascertain their relevance.
The LED TV industry is also one of the biggest employers, with estimated employment of 50,000 people directly and many more indirectly through ancillary units.
The industry has sought a policy to enable phased manufacturing and end-to-end manufacturing of televisions in India.
Since the nationwide lockdown amidst the Coronavirus outbreak came into effect on March 25, there has been a slump in sale of appliances. From May, when a phased easing of the lockdown began, the business has seen a revival though sales are still at only 55 percent of their 2019 levels.
TV makers are pinning their hopes on the festive season, which begins in September, to help restore revenue lost during the lockdown.