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Underlining the state of electronics-Economic Survey, 2021-22

The Economic Survey, tabled in the Parliament, one day before the Union Budget by the Finance Minister is a much-awaited document.  Primarily authored by the principal economic adviser and his team, the Survey is a Department of Economic Affairs (DEA) document that underlines the state of the economy and outlines suggestions for policy actions.

Key highlights from the Economic Survey 2022 for the electronics industry
World over, electronics is recognised as a ‘meta-resource’. Electronics industry is the world’s largest and fastest growing industry and is increasingly finding applications in all sectors of the economy. With its impact in developing infrastructure, raising productivity, increasing efficiency in delivery of services, and enabling social transformation, it is accepted as a key enabler in the country’s economic development.

Government accords high priority to electronics hardware manufacturing. The government has therefore notified the National Policy on Electronics 2019 (NPE 2019) on 25.02.2019 to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chipsets. Additionally, NPE 2019 attempts to catalyze the growth of Indian electronics ecosystem through the (i)Production Linked Incentive (PLI) Schemes for Large Scale Electronics Manufacturing, (ii) PLI Scheme for IT Hardware; (iii) Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS); and (iv) Modified Electronics Manufacturing Clusters 2.0 (EMC 2.0).PLI for Large Scale Electronics Manufacturing has been notified on April 01, 2020 which provides an incentive of 4 to 6 percent on incremental sales (over base year)to eligible companies involved in mobile phone manufacturing and manufacturing of specified electronic components, including Assembly, Testing, Marking and Packaging(ATMP) units (See box 3 for details on PLI scheme). As per June 2021 Quarterly Revenue Recover (QRR) the scheme has resulted in investment of Rs. 2,595 crore and production worth Rs.67,275 crore of which, 31 percent or Rs. 20,568 crore was exported. PLI scheme for IT Hardware was notified on March 03, 2021 which extends an incentive in the range of 1 to 4 percent on net incremental sales (over base year) of goods manufactured in India and covered under the target segment, to eligible companies, for a period of four years. The target segment under PLI Scheme includes Laptops, Tablets, All-in-One PCs and Servers.

As per Q2:FY21-22QRR, total sales of manufactured goods in target segment stood at Rs. 503 crores with Rs. 16.50 crore investment.

Further, the government has through the SPECS scheme and the EMC 2.0 provided an enabling environment in the form of financial incentive for capital expenditure and by creating plug  and play facilities with the view of attracting major electronics manufacturers.

Recently, the government has approved an outlay of Rs. 76,000 Crore (>US$ 10 Bn) for the development of Semiconductors and Display Manufacturing Ecosystem. Government’s intervention to boost this industry has come at a time when the global economy is facing an acute shortage of semiconductors due to severe disruptions in supply chains. Several companies from diverse industries have been forced to either       shut or curtail production in response to breakdown of supply chains. The PLI and other schemes to boost semiconductors will not only help domestic companies to overcome the challenges posed by COVID-19 but also assist them to become globally competitive especially in chip making. Semiconductors are integral part of modern technology used in automobiles and its components, electronic and medical devices. The comprehensive interventions being introduced by the government will aid in the establishment of an ecosystem that boosts semiconductor production in India.

Box 2: PARAKH – A Unified Laboratory Network
Recognizing that testing and certification are crucial for enhancing the competitiveness of Indian goods and services, a portal called “PARAKH” has been set up in June 2021, wherein all the accredited, certified and recognised laboratories in the country would be mapped on a Geographic Information System (GIS). This united laboratory network has been developed with the support of Ministry of Electronics and Information Technology (MEITY), Bhaskaracharya National Institute of Space Applications and Geo Informatics, Gujarat (BISAG) and the concerned line ministries/ departments of the Government of India. Over 6,580 laboratories have already been mapped on the portal including NABL accredited laboratories. These also include 477 BIS empaneled and recognized laboratories. Laboratories recognized by FSSAI, EIC, APEDA and CSIR have also been mapped on the portal. The portal makes it possible to search labs for a particular product, standard, test method in a state or a city and also find nearby labs. It also enables finding the scope of accreditation and test methods of a laboratory. The portal allows for adding new private laboratories and booking a test through it.
Box 3: Production Linked Incentives Schemes
PLI Schemes launched in March 2020, are a cornerstone of the Government’s push for achieving an AtmaNirbhar Bharat. The idea is to provide support to the sectors, regain dominance in global trade and be more prepared for the volatilities and shocks in global supply chains as opposed to the protectionist approach of the pre-1991 era. The objective of the scheme is to boost domestic manufacturing in sunrise and strategic sectors, improve cost competitiveness of domestically manufactured goods, enhance domestic capacity and economies of scale. The scheme is specifically designed to attract investments in sectors of core competency and cutting-edge technology. The selection of sectors has been done based on the sectors’ abilities to introduce latest technology, generate direct and indirect employment by reaching global scales while increasing competitiveness to ensure penetration of Indian companies in the global value chains.

This scheme is expected to make domestic manufacturing globally competitive and will create global champions in manufacturing. The Government has already committed Rs.1.97 lakh crores, over 5 years starting from 2021-22 in 13 sectors. Recently, PLI in the 14th sector – drones and drone components has been included with an additional layout of Rs. 120 crores. The initial 13 sectors are Electronic/Technology Products, Medical devices, Drug intermediaries and APIs, Mobile Manufacturing and Specified Electronic Components, Pharmaceuticals drugs, Telecom & Networking Products, Telecommunications, Food Products, White Goods (ACs & LED), High Efficiency Solar PV Modules, Automobiles & Auto Components, Advance Chemistry Cell (ACC) Battery, Textile Products: Man Made Fabrics segment and technical textiles and Specialty Steel.

So far, the 13 initial schemes have been notified and guidelines have been issued where required. The first three schemes notified were for mobile phones and specified electronic components, APIs/Drug intermediates and medical devices. In case of mobile phones and specified electronic components, in the first round, 16 applications worth Rs. 36440 crores were approved and in the second round, 18 applications worth Rs. 483 crores were approved by the competent authority. In case of APIs/drug intermediates and medical devices, 42 applications worth Rs. 4347.26 crore and 13 applications with a committed investment of Rs. 798.93 crores have been approved so far by the competent authority, respectively.

POLICY MEASURES TO ENHANCE THE EFFICIENCY OF GOVERNMENT SPENDING While restructuring expenditure is a significant aspect of fiscal policy, enhancing the efficiency of Government spending is also important. Public procurement, which involves purchase of goods and services by the Government with an aim to not only carry day-to-day tasks but to also create social and economic infrastructure, is an important component of the Government expenditure. Government has undertaken consistent efforts to boost the efficiency of public procurement policy.

Government e-Marketplace (GeM)
The Government in 2016 had set up a dedicated e-market known as Government e-Marketplace (GeM) for purchase of certain standard day to day use goods. This is a simple, transparent and completely digital process for procurement. The General Financial Rules 2017 mandates all Ministries and Departments to procure Goods and Services available on GeM from GeM. The procedural changes in the procurement method after the introduction of GeM are given below (Table 8).

Table 8: Procedure for public procurement before and after GeM
Category Before GeM After GeM
Process of invitation of bids Manual process for the invitation of bids, bid evaluation and finalization of the winning bid. Completely online, no requirement for physical documentation.
Public procurement policy Multiple agencies with multiple procurement guidelines and procedures. Single, unified, fully online public procurement portal with clear guidelines.
Method of procurement Paper-based procurement procedure with physical interaction. Contactless, paperless and cashless with time-bound payments and real- time monitoring.
Method of negotiation and deliberation Manual negotiation and fixing rates with the bidder and arriving at one rate applicable to all bidders. Automatic, digitization and transparent processes.
Process of registration of vendors Registration of vendors was a manual process involving visit by officials to the vendor premises and was a time- consuming process. Authentication of users is done through API integration with respective domain databases.
Eligible articipants to the bid Limited bidding & only registered vendors could participate. Any vendor of the platform can participate in the bid as long the product matches the bid.
Monitoring of product delivered or service provided Huge delay in delivery of products and delay in payment. Real-time monitoring to ensure on-schedule delivery of products and services.

Source: Ministry of Commerce, PIB

Anecdotal evidence suggests that prior to GeM, government procurement prices were much higher than the prices prevailing in the market and there were constant complaints about inefficiency and rent seeking. The use of this e-marketplace has resulted in a substantial reduction in prices in comparison to the rates used earlier, with average prices falling by at least 15-20 per cent, up to 56 per cent3. Box 5 depicts a comparison of prices on the GeM portal and other online marketplaces for a selected sample of goods.

Box 5: Prices of various commodities on the GeM portal vis-a-vis

other online platforms

A comparison of prices of various commodities on the GeM portal with those of company websites or other online platforms such as Amazon, Flipkart, etc. is given in the table below. A similar analysis was included in Chapter 6 of Economic Survey 2020-21. For a close comparison, sample of same commodities as selected last year, is used to the extent possible. In cases where the exact commodity was not available, the newly available models were chosen. While in the last year’s analysis, GeM prices were on an average 3 per cent lower when compared with other platforms, this time it is around

9.5 per cent lower for the chosen sample. 10 out of 22 commodities in the sample were cheaper on the GeM portal as compared to other platforms.

 

Name and Description (Model, features)

 

Price on GeM portal

(in `)

Price at Amazon/ Flipkart/company Website etc. (in `) % Variation in Offer Price (GEM prices over market prices)
 

Parker Jotter Standard Ball Pen

MRP: 250;

Offer Price (OP): 200

Amazon; MRP: 250;

OP: 207

 

-3.50

Rorito Greetz Gel Pen Maxtron Gold Robotic Fluid Ink System Pen -Blue MRP: 99; OP:51 Amazon; MRP: Not Mentioned; OP: 119  

-133.33

Samsung Basic Television TV 43 Inch LED Backlit LCD

Model: SAMSUNG DC43J

MRP: 49,069

OP: 40,000;

Warranty- 5 Year

Amazon.in- MRP: 69,000

OP: 43,900

 

-9.75

 

Omron White HEM 7156AP Blood Pressure Monitor

MRP: 3,860;

OP: 3,100;

Warranty – 2 years

Industryowl.com MRP: 2749; OP: 2,749

Warranty – 3 years

 

11.32

 

HP LaserJet Enterprise M507dn

MRP: 81,780

OP: 69,005

Warranty – 3 Years

Amazon; MRP: 82,450;

OP: 69,005

Warranty – 1 Year

 

0.00

Kores Easy Cut 871 Paper Shred- der MRP: 25,490,

OP: 22,940

Amazon; MRP: 23,990,

OP: 20,130

 

12.25

HERO CYCLES Jet Gold 28T

Unisex Road Cycle (Single Speed, Black)

MRP: 8,900;

OP: 5,599

Amazon; MRP: 6,250;

OP: 5,500

 

1.77

 

Milton 1500ml thermos

MRP: 1,560,

OP: 1,101

Amazon: MRP: 1,875;

OP: 1,499

 

-36.15

 

Nilkamal Dustbin 60 Litres

MRP: 2,150,

OP: 840

Amazon- MRP: 1,599;

OP: 1,350

 

-60.71

Nilkamal Pinnacle High Back Chair MRP: 23,500,

OP: 21,150

Nilkamalfurniture.com MRP: 17,000; OP:

16,674

 

21.16

 

Bajaj Pulsar 220 F

 

MRP: 1,18,250

OP: 1,18,250

Bikewale.com- MRP: 1,30,827 (Ex-show-

room price in New Delhi)

 

-10.64

Godrej Interio Elite Mid Back Chair MRP: 15,020,

OP: 13,150

Godrej Interio website- MRP: 15,020  

-14.22

Godrej Interio Steel Almirah 2400 mm (Slide N Store Compact Plus Wardrobe) MRP: 34,374,

OP: 32,239

Godrej Interio website- MRP: 34,374  

-6.62

GODREJ INTERIO RHINE 3-SEATER RECLINER MRP: 60,226,

OP: 54,203

Warranty 1 year

Amazon; MRP: 66,444, OP: 66,444

Warranty- 1 year

 

-22.58

 

 

Dell OptiPlex 5490 AIO

 

MRP: 125,000,

OP: 98,560

Warranty: 3 years

Hp website MRP: 138,490;

OP: 79,069

Warranty: 1 Year Additional 2-year war- ranty: 10,500

 

 

9.12

Microtek Twin Guard Pro+ 1000VA UPS MRP: 6,700, OP:6,030 Flipkart MRP: 6,000,

OP: 5,100

15.42
Sony MHC-V21D High Power Portable Party System (HDMI, DVD, Bluetooth, NFC & USB) – Black  

MRP: 27,999, OP:24,997

 

MRP: 27,999, OP:18,999

 

23.99

Ambrane 27000mAh Li-Polymer Powerbank with Type C MRP: 3,999, OP:1,390 MRP: 3,400, OP:1,999 -43.81
BLUE STAR Floor Mounted Hot, Cold and Normal Water Dispenser MRP: 9,900, OP:8,570 MRP: 11,700,

OP: 8,398

2.01
BAJAJ Majesty RH11 F Plus Oil Filled Room Heater MRP: 15,000, OP:11,113 MRP: 12,171,

OP: 10,299

7.32
Neelgagan Notepad No. 33, 160 Pages/Notepad, Pack of 05 MRP: 480, OP:190 MRP: 499,

OP: 179

5.79
Philips Base B22 7-Watt LED Bulb MRP: 160, OP:143 MRP: 140,

OP: 111

22.38

These results are broadly in line with the assessment of GeM conducted by the World Bank, which found that GeM enabled an average savings of 9.75 per cent on the median price for the period between February 2019 and January 2020. The maximum savings in the top five categories ranged from 23.5 per cent to 60.5 per cent. The study attributed this, in large part, to increased participation per bid and better price discovery.

Major Schemes & Initiatives to boost exports
The impressive performance of India’s exports may be attributed to various schemes and initiatives taken by the Government to boost exports and to reduce the adverse impact of COVID-19. Some of these schemes are as under:

  1. Remission of Duties and Taxes on Exported Products (RoDTEP): In order to boost Indian exports, a WTO compliant RoDTEP scheme is brought into effect from 01.2021. Based on the globally accepted principle that taxes and duties should not be exported, this scheme is an improvement over Merchandise Exports from India Scheme (MEIS). This new scheme reimburses currently un-refunded Central, State, and Local taxes and duties incurred in the process of manufacture and distribution of exported products and thereby provides a level playing field to domestic industry abroad. Major components of taxes covered are electricity duty, value-added tax (VAT) on fuels used in transportation/ distribution, mandi tax, stamp duty, etc.
  2. Developing District as Export Hub: Under this initiative, the focus is to make districts active stakeholders in the promotion of exports of goods/services produced/ manufactured in the District Export Promotion Committees (DEPCs) have been set up in each district. Products with export potential (including agricultural, geographical indication (GI) & toy clusters) have been identified in all 739 districts across the country. This scheme would help in diversifying the portfolio of export commodities.
  • Production-Linked Incentive (PLI) scheme: An outlay of `97 lakh crore (US$ 26 billion) was announced in Union Budget 2021-22 for Production-Linked Incentive (PLI)

scheme for 14 key sectors starting from 2021-22. The scheme provides incentives to companies on incremental sales for products manufactured in domestic units, which is expected to create minimum production of over US$ 500 billion in 5 years. Automobiles and auto components, pharmaceutical drugs, telecom & networking products, electronic/ technology products, etc., are some of the sectors covered under PLI scheme. The scheme is expected to give a push to both domestic manufacturing capabilities and exports. (Refer to Industry and Infrastructure Chapter for details)

  1. Electronic Platform for Preferential Certificate of Origin (CoO): In view of the COVID-19 crisis, on-boarding of FTAs/ preferential trade agreements (PTAs) was quickly done to allow electronic issuance to avoid physical movement. Around 4.6 lakh CoOs have been issued from the e-platform till date.2 Issuance of Non-Preferential CoOs was also started from 15.04.2021.
  2. Infusion of capital in EXIM Bank: Government of India infused capital of `750 crore in Export-Import Bank of India (EXIM Bank) during the current financial year 2021-22 through subscription to its share capital.
  3. Export Credit Guarantee Corporation of India (ECGC) provides insurance cover to banks against risks in export credit lending to the exporter borrowers. Government approved capital infusion of `4,400 crore to ECGC Ltd. over a period of five years, i.e. from 2021-2022 to 2025-2026. This will increase the capacity of ECGC to underwrite risks up to `88,000 crore, that will support additional exports of `5.28 lakh crore over the five- year period.
  • Export Promotion Capital Goods (EPCG) Scheme is an ongoing scheme under the foreign trade policy. In order to increase procurement of capital goods from indigenous manufacturers under the EPCG scheme, the government has reduced specific export obligations from 90 per cent to 75 per cent of the normal export obligation.
  • The export promotion schemes such as Trade Infrastructure for Export Scheme (TIES), Market Access Initiatives (MAI), Special Economic Zone (SEZ) scheme, Emergency Credit Line Guarantee Scheme (ECLGS) and Advance Authorization Scheme continue to provide support to trade infrastructure and marketing.

TVJ Bureau

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