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Company : MAIT 
Wednesday, March 14, 2001 2:45PM IST (9:15AM GMT)
Hardware Industry pins hope on the EXIM Policy
New Delhi, Delhi, India

MAIT, the apex body representing the hardware, training and services sectors of the IT industry in the country, today shared the details of the implications of the recently announced Union Budget on the Indian IT industry and also the IT Industry's expectations from the forthcoming EXIM Policy.

Elaborating on the details of the Budget, Mr Vinay Deshpande, President MAIT said " There is no room for price reduction for any IT products manufactured in India - be it by Domestic players or MNCs. Due to removal of surcharge on the Basic Customs Duty, the scope of price reduction for high-end finished goods imports like Servers and Notebooks is a meager 1.3%. We have been asking for reduction in Excise Duty to 8% from existing 16% for almost 3 years now; however, the mood in the Ministry is to move towards a VAT in next couple of years with a single rate of 16%."

The IT hardware and manufacturing sectors have been looking forward to policy measures from the Government to enable the following:

1.) Sustainable manufacturing in the IT sector; and 

2.) Reduction in prices of IT products for increased penetration.

On the issue of manufacturing, the most feasible solution under the current circumstances would be to create Special Economic Zones (SEZs) for the Hardware Sector and the Electronic Hardware Technology Park (EHTP) scheme with necessary modifications.

The IT hardware industry in India is faced with the challenge of the IT Agreement of the WTO. As committed, the Indian IT industry will be a zero duty industry in the year 2003. The immense concern is that although the entire IT sector will hit the zero duty regime in 2003, non-IT input components viz. plastic parts, metal parts, chemicals etc. will not be zero duty. This would make IT manufacturing unviable.

Commenting on his expectations of the EXIM Policy, Mr Vinnie Mehta, Director MAIT said "The Ministry of Commerce has been very supportive of the MAIT recommendations and we are expecting a favourable EXIM Policy. A group on hardware was convened under the aegis of the Hon'ble Minister of Commerce, Shri Murasoli Maran after the EXIM Policy announcement in 2000-01 to look into the problems of the Hardware sector. Setting up of SEZs for Hardware and modification of EHTP are our key expectations from the forthcoming EXIM Policy." 

The EXIM Policy is also expected to focus on the following:
1.) Modification of Labour Laws
2.) Encouraging R&D for global market
3.) Focus on non-IT Hardware: Security Electronics, Electronic toys, Intelligent manufacturing, automotive electronics

"MAIT has recommended that the condition for compliance with Net Foreign Exchange Positive (NFEP) condition in the SEZs and the EHTP be removed. This would accord the necessary flexibility to the entrepreneurs to decide the markets in which they would wish to sell. Further, we have also recommended that the facility of consessional access to the domestic market be withdrawn which means that the industry will have to pay the full rate of customs duty and all other local levies when finished products are sold in the domestic market. This would ensure that the Government does not lose any revenue due to free import of inputs and components" added Mr Mehta.

The industry currently is faced with unduly high transaction time especially those related to clearance of consignments for imports and exports. Duty free imports of parts and components and payment of duty only at the time of entry into the domestic market in the SEZs and EHTP will drastically cut down the transactions and improve the cycle time significantly.

Additionally, setting up of SEZs for Hardware and the modification of the EHTP will make the manufacture of IT and electronic components viable as the peak rate of duty in this case is only 0-5%.

MAIT has also recommended that issues of Labour Law viz. contract employment, flexible timing, enabling removal of employees who cannot be retrained in new technologies etc. be addressed in the EXIM Policy as these are critical enablers for IT manufacturing.

Download the entire presentation: www.mait.com/demo/exim2001.zip 

About MAIT
Set up in 1982 for purposes of scientific, educational and IT industry promotion, MAIT has emerged as an effective, influential and dynamic organisation. Representing hardware, training and the services sectors of the Indian IT Industry, MAIT's charter is to develop a global competitive Indian IT Industry, promote the usage of IT in India, strengthen the role of IT in national economic development and promote business through international alliances.

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Pushpa Nair, pushpa@business2media.com, +91-11-3326022
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