India will turn World’s number 1 Mobile manufacturing destination through Product Linked Incentive: Pankaj Mohindroo, Chairman, ICEA

Pankaj Mohindroo is the Chairman of the India Cellular & Electronics Association (ICEA), talks about the production linked incentive for electronic items and ground situation of manufacturing among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: The government in recent past has unveiled a Rs 50,000 crore Production Linked Incentive (PLI) for electronics items with an aim to turn India into a manufacturing hub. What is your view on this announcement?

A: This is a game-changer scheme. The important thing in it is that it is a five-year scheme and rides on the corporate tax reduction and the success we have achieved in mobile phone manufacturing, which has increased 1,100 per cent in the last four years. The scheme will give further momentum to it and make sure that we turn up to be the world’s number one manufacturing destination in terms of mobile phones in the next 5 years. We, at present, manufacture 15 per cent mobiles of the world, 75 per cent mobiles are manufactured in China and 8-9 per cent is manufactured in Vietnam. These are the three important destinations for mobile manufacturing. Obviously, manufacturing will shift from China to India and additional manufacturing will come to India. The scheme will mitigate our disabilities that have been created for over the last many decades and will shift the traditional mentality of import substitution towards exports. A country can become strong only if it draws the shares from the world’s economy and brings it to itself. As no country can become strong on the basis of its domestic market and our domestic market is a very small part of the overall world’s GDP, around 3-3.50 per cent and 96-97 per cent is bigger than the former. The scheme has been prepared with that thought. 

Q: What is the situation on the ground at present? If we talk about manufacturing than can you tell us about the level at which manufacturing has been started in factories across different companies 

A: We are with the government and have created a three-word strategy, ‘Restart, Revive and Resurge.’ Restart for restart is May and June, which will be followed by the revival process. The restart will face many troubles like transportation to normalize the supply chain and fortunately, the transportation supply chain has normalized to a great extent because the component supply countries like China whose economy has turned normal. Secondly, we should normalize manufacturing which is in patches at present as few factories have reached 30 per cent of their capacity, while others are at 40 per cent. I think we will reach the 50% level by the end of June. Manufacturing and sales were shut down completely for a period of two months, which resulted in the creation of pent-up demand, which made us believe that there is a lot of demand but it has subsidized. But, there is a 50 per cent demand now when compared to the normal market demand. Generally, the industry is not able to supply complete it completely in terms of the entry-level phones raging between Rs 10,000-15,000. The biggest negative factor is that GST has been increased by 50 per cent, which seems to be a negative factor in the mind of the consumers. They, the consumers, were facing problems as their phones were out of order. This created a sudden demand for 3-4 crore mobile phones but many of them got their phones repaired. So, those who have a look at the 18 per cent GST are hurt the most and this is a big negative factor and will constraint demand in near future. Besides, the grey market, which is present in high-end phones ranging between Rs 40,000 and Rs 50,000 and above, is also reviving in phones ranging between Rs 5,000 and Rs 10,000. 

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Q: Are you expecting/ seeking any change in duties in import and export, especially for electronic goods, to make India a more attractive destination for foreign companies so that they come to India and set-up their manufacturing units?

A: The import substitution mindset has started turning meaningless a bit, now, as exported products worth Rs 26,000 crore last year, however, I can’t say what will happen this year in FY 2020-21 but will export products worth Rs 1-1.50 lakh crore in FY 2021-22. With this, we must not think about import duty as it has increasingly turned meaningless. We have requested certain things and they are (i) higher-end products that will always be imported as they have moved to grey market completely because of the high import duty of 22 per cent plus GST. Thus, India has turned into the highest taxed country in the world, which stands around 44 per cent and it should be rationalized. (ii) We also have a phased-manufacturing programme - which needs change in the mind-set – which involves capacity building, technology creation, outreach and bringing the company to India. It is not so that just imposing duties will help in establishing industries. So, a duty will be imposed on displays from October 1, 2020, and I would like to request to extend it further amid COVID as other plans have been deferred. We don’t want any change in duty structure as it will turn meaningless in the next 1-2 years because India is changing its direction.