Friday, September 06, 2013: Vinod Sharma, managing director, Deki Electronics, was appointed chairman of the Electronics and Computer Software Export Promotion Council (ESC) and the chairman, Confederation of Indian Industries’ (CII) National Committee on ICTE Manufacturing in May 2013. In his first interview after taking over the new responsibilities, Sharma spoke to Srabani Sen of Electronics Bazaar about his roles in ESC and CII, and about the recent government initiatives
EB: What is your role as the chairman of ESC and CII?
I am really happy to lead ESC, the export promotion council that represents 18 per cent of India’s exports, at such a challenging time—when the government is trying to promote electronics manufacturing and exports as well.
ESC represents two very important segments—one is software, which is the largest contributor to value-added exports and has enhanced India’s image in the world on several counts. The other segment is electronics hardware, which is today the second largest contributor to India’s trade deficit.
While exports have shown near-flat growth during the last three years, our imports are steadily growing. The electronics industry suffers from an image of ‘having missed the bus’—of not starting manufacturing at the right time. For several reasons, it’s a bus that India cannot afford to miss again.
Our growing aspirations are reflected in a projected domestic market size for electronics hardware of US$ 400 billion by 2020.
The ambitious and holistic National Policy for Electronics (NPE) 2012 aims at establishing India as a manufacturing and exporting hub for electronics. The policy envisages the creation of 28 million jobs, and exports worth US$ 80 billion by 2020. So, it’s time for the industry to take action. However, much more remains to be done.
CII, the premier business support organisation in India, is a very effective platform to leverage its well established network with the policy makers and the industry. It organises events for business development and enhancement of competitiveness. CII operates through sectoral committees—one on ICTE for electronics hardware, there is another committee for software, yet another on office equipment and related areas. It’s a national committee that helps take up industry issues with the government, through advocacy. It offers a common platform for dialogue between the industry and the government.
My role in both the organisations will be to drive the discussions on the issues and challenges of the industry forward and build on the evolving trends that are moving towards India becoming a manufacturing and export hub. I would like to further ensure that both the associations act as catalysts in bringing about the growth and development of the Indian IT and electronics industry. Another task is to provide up-to-date information and data to the industry and government, and create awareness about the recent government initiatives among those in the industry.
The most urgent and perhaps the most important task is to bring back the ‘belief’ within the industry that we are ‘on the bus’ this time.
EB: With the current government initiatives, can we expect more Indian companies venturing into manufacturing?
We have the policies, and they are more or less good. Knowing India and the way things work out here, there will always be some issues and hindrances when it comes to implementing these policies. All the associations will have to play a role to see that the policies are implemented in their true spirit.
In the earlier days, manufacturers continued to manufacture in India despite an unfavourable environment. Of late, we have become cynical as we have burnt our fingers. Many of the manufacturers had to close down their businesses due to the non-conducive manufacturing environment in the country. But today, the new breed of entrepreneurs want a guaranteed return on their investment; they want to make sure that there are no obstacles to developing their businesses. They are good MBAs.
Today, we have more of managers than entrepreneurs. But now we need more entrepreneurs who can take up the challenges and risks. So the discussion has to change—instead of being cynical, the industry now needs to act, come forward and have a dialogue with the government and see to it that the policies are implemented in their true spirit to ensure that the environment becomes conducive for manufacturing.
So, yes, we can expect more manufacturing to happen in India if the government seriously implements its recent policies with the same vigour with which they brought in these policies.
What is the thing we look for in a business? It is demand, and in India, we have a strong demand for electronics. Of course, we can argue that the taxes are high, and the cost of finance is high. But if the Indians don’t start manufacturing now, obviously China, Taiwan and Japan will meet all this demand. But with the Chinese economy growing to be far more private sector driven and the labour costs rising there, I think Indian companies will do better and have a fair chance.
So, if we make an investment wherein 25 per cent of capital subsidy is given by the Indian government, and 15 per cent is added to that if you involved in a Rs 1 billion plus project, and a 6 per cent reimbursement on excise, you can procure a total of 46 per cent capital subsidy on your investments. Of this, 6 per cent excise is only a cash flow advantage.
Hence, it comes down to 40 per cent for large investments plus 6 per cent excise cash flow benefit, for two years. However, the proposed fiscal incentives envisaged in the NPE across the value chain, through a Modified Special Incentive Package Scheme (MSIPS), would go a long way in mitigating the disability costs in information, communication technology and electronics (ICTE) manufacturing. It would make the industry competitive. So, if you are serious in building a large business, I think it is the right time to do it now.
EB: Do you see any limitations in the recent government policies?
The Preferential Market Access (PMA) policy has been put on hold by the PMO. To the best of my information, this has been done at the behest of the US industry lobby. It is disheartening to note that they seem to have more access and influence on our PMO than the Indian industry. We believed that the PMA was the boldest policy coming from a government that was finally serious on manufacturing. Withholding this is a big setback to the industry.
For the MSIPS, I find the application process, especially at the ‘in-principle approval’ level, too lengthy. It’s too detailed. It could have been kept to the minimum.
Also, Rs one billion threshhold figure for EMS industry is too high and impractical. This should be brought down to Rs 100 million.
EB: What will CII and ESC do in spreading awareness about these policies?
Advocacy is a major activity that we take up. Individually, a company may not put across its points to the government, but CII can take it up with the government as an industry representative. If you go to the government with just complaints, you may not achieve much, but if you go with a proposal which makes sense, there is a possibility that the government may understand it. This is what I would like to emphasise—to make business proposals to the government.
Another focus is offering the best service to our members—giving them the right information. For example, giving a basic level of information related to exports. In this industry, lack of information is an issue.
The third task is helping the industry with certification, disseminating the information about various certifications, for example, the certifications required to export to various international markets, etc. I would also like to take these associations to the next level of leadership by bringing in new people and trying out their new ideas. And finally, help in trade promotion—taking Indian companies to the fairs and evaluating the trade atmosphere in a particular country.
I want to meet the top 20 MNCs in India and understand the difficulties they face here, so that we can do advocacy for them. I am meeting these companies individually as their problems can be very specific. We will also arrange a buyer-seller meet at the national level.
EB: Many states have come out with their own policies. Do you think this will help them gain more investments?
Only four states have announced policies for the electronics industry. It’s good, but I have a concern—there will be a competition among the states as some of the states have power surplus while others do not. The second issue is the cost of land, which varies from state to state. Third is VAT, which again differs from state to state. The main attraction of the state policies is the VAT exemption, but when GST comes into effect, it will be interesting to see what happens to all the concessions offered by the state policies.
Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine