Electronics manufacturers on Tuesday sought targeted policy refinements, including duty rationalisation and relief on bonded warehousing provisions, at a post-Budget consultation with the ministry of electronics and information technology (MeitY) on the Rs 40,000-crore expansion of the Electronics Components Manufacturing Scheme (ECMS).
The meeting was attended by industry representatives from Dixon Technologies, Tata Electronics, ICEA, Vishay Components and ASM Technologies, among others. While welcoming the expanded outlay, companies flagged structural cost issues that they said could dilute the scheme’s impact on domestic value addition.
Concerns raised regarding inverted duty structure
A key concern relates to the inverted duty structure on parts, components and sub-assemblies used to manufacture capital equipment. In several cases, these inputs attract higher customs duties than the finished equipment they go into, discouraging local production of tooling and machinery. Industry executives said that correcting such anomalies would improve cost competitiveness and incentivise domestic capital goods manufacturing, which remains import-dependent.
On bonded warehousing, companies raised the issue of the safe-harbour provision that permits a 2% margin for non-resident component warehousing. After accounting for taxation, this translates into an additional cost of roughly 0.7%, they said. In a sector characterised by thin operating margins and high volume play, manufacturers urged the government to reconsider the framework and allow full exemption on warehousing margins to prevent erosion of competitiveness.
Five-year tax exemption for foreign suppliers of capital goods
Industry participants also welcomed the five-year tax exemption for foreign suppliers of capital goods but said that electronics manufacturing investments typically have longer gestation cycles. They pointed out that the duration should be aligned with incentive structures available in other capital-intensive sectors to provide visibility and encourage deeper technology transfer.
Beyond fiscal measures, companies called for targeted support to localise capital equipment manufacturing, facilitate technology partnerships and attract global anchor investors in precision engineering, optics, RF and memory technologies. Operational constraints were also highlighted, including delays in visas for foreign technicians required for equipment installation and process stabilisation. Streamlined approvals for MeitY-recognised firms, they said, would help accelerate project ramp-up.
The ECMS has so far drawn over Rs 54,000 crore in investment commitments with a potential to generate more than 50,000 direct jobs, with firms such as Tata, Foxconn and Dixon expanding into higher-value components. Industry executives said calibrated policy adjustments could help the scheme shift the sector from assembly-led growth to deeper component manufacturing and capital equipment capability.