Excise duty cut on STBs bring little cheer to local manufacturers

MUMBAI: The finance ministry's decision to notify a reduction in customs duty from 25 per cent to 5 per cent on key components of a set-top box -- tuners, remote control units and RF-modulators - in addition to abolishing excise duty on set-top boxes (STBs) has upset local manufacturers. There is a feeling that locals who make these items for television and perhaps telecom equipment will be hit because imports of these components will be cheaper than local manufacture, in the absence of countervailing duty on the import.


Broadband Pacenet (India) CEO S Ravindran reacts by saying: "Considering the estimated demand of 40 million boxes, the only way the government can give a boost to the local Indian industry is if the IPR for the design of the box and CAS is held in India. Otherwise, import is cheaper and the government will only play into the hands of foreign manufacturers. The moot point is that the box and CAS are integral units - that is why STBs can be rented (avoiding sales tax) because the box is part of the plant controlled by CAS."


Experts are also critical of the fact that the ministry has not exempted the key components from excise duty. Sanjiv Narayan, president, Electronics Component Industry Association (Elcina), was quoted in a leading business daily as saying that if the components manufactured locally carry a 16 per cent excise duty but there is no excise duty on a finished STB, there is no set off for the manufacturer and the value-addition chain is broken.

HTMT group director and CTO KV Seshasayee says that the situation will not be clear until notiifcation comes through. "There is no excise duty if these items are imported - the components are not sold to customers. Presently these componenets are not made in India. ELCINA should be able to get clarification from the Ministry that if they supply these items locally, the STB manufacturer should be able to claim drawback on this, or the tuner manufacturer should be excise exempt when delivering to STB vendor. The remote control units are already made in India, and costs are comparable," he adds.

Seshasayee also adds: "These are operational matters which component manufacturers have to work out with government. We as MSOs can help in the process."

Broadband's Ravindran also feels that the government's strategy is anti-consumer. "The royalty on CAS can be calculated at $10/box and smart cards are replaced every year and cost $4. These will be continuous outflows and the subscriber will have to bear this cost. Certainly the government is not endeavouring to make it consumer friendly as other countries have done. In China, the government has made Chinacrypt as standard--so consumer gets flexibility and the government gets security. "

According to industry sources, manufacturers in China are able to supply globally because domestic policy allows them to manufacture locally for exports as well as domestic consumption.

Asked to comment on the government's latest effort to get STBs moving in the market and the reaction of local manufacturers, HTMT group director and CTO KV Seshasayee said the situation would only be clear after the government notification came through.

He however made two points. The first being that there is no excise duty if these items are imported (the components are not sold to customers).

And referring specifically to the complaints made by local manufactuerers, Seshasayee said, "Presently these componenets are not made in India. Elcina should be able to get a clarification from the ministry that if they supply these items locally, the STB manufacturer should be able to claim a drawback on this, or the tuner manufacturer should be excise exempt when delivering to STB vendor. Remote control units are already made in India, and costs are comparable."

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