Suneet Singh Tuli, the CEO of Datawind, which gave India the affordable Aakash tablet, was the first to set up a touchscreen manufacturing unit in India a few years back. Now, when the country is talking about Make in India, he has made a presentation to the government suggesting some tough decisions need to be taken for the idea to work.
“We told them that India is going to import 26 crore mobile phones in the coming year. The number of people directly and indirectly employed in creating those phones is five lakh. If we change our duty structure we can get those five lakh jobs,” he said in an interaction.
Tuli is of the opinion that Mexico and Brazil have the best duty regimes. “Mexico created huge barriers for those importing and forced everybody to assemble there. So the duties for parts in Mexico are very low while the duties for finished goods are through the roof,” he said.
India took a different approach, of not penalising the consumer and focusing on industries we want to protect, the DataWind CEO revealed. “They looked at industries like smartphones and tablets in India and since no one made them in India they kept the duties reasonably low. But when they looked at the components, the harmonisation codes they fall under like plastics, glass etc and other industries in India, though not the same. So the duties on those components are high,” he said, giving the example of batteries. “Batteries are charged at 28%, but a mobile phone consisting one is at 6%. “The discretionary decision on this is now with the Customs and that is a messy scenario.”
“The government feels that if they change this regime they will lose revenue. But there is no one doing it locally and the loss in revenue can be offset by the new jobs that are going to be created. The incentive for the government now is not to Make in India, but to balance the budget,” he reasoned. “My proposal was to keep the duty on parts high, but make the rate of manufactured good also high so that there is still an incentive. We have made this proposal publicly, let’s see if the government addresses it or not.”
But isn’t a ecosystem necessary for manufacturing to thrive? Tuli is sure that ultimately parts will also be made in India. “The moment so many phones start being made in India the component suppliers too will come in to offer just in time delivery. This happened in the case of the Nokia plant in Chennai with Chinese suppliers setting up shop nearby. We want the components suppliers to come in first, after which we will think of what to do with manufacturing. That is not going to happen,” he said.
According to Tuli, the present government is in a good spot and not under pressure to get manufacturing work. “My big belief is that at least for the next few months, thanks to the drop in oil prices, the Indian government does not need to worry about what the world market thinks about us. We need to get our manufacturing infrastructure in place. I am a big believer that manufacturing must happen in India, but there are barriers and the government must take tough decisions to remove these barriers,” he explained.
The whole focus on Make in India, he said, is because there is a fear that we have not trained our people to be a service economy. “But that is a short term approach. Education and skills training is very important in the long run and technology has a big role to play in this. We must allow the cost of the devices to come down. Today, I can sell a product cheaper in the US. My product price here is 25% lower there. This is where we are losing out.”
As far as digital India goes, Tuli said that there are four pieces in the puzzle—low-cost devices, free Internet, relevant content and training. “But despite our best efforts, our scale is just a drop in the ocean. The policies have to drive more manufacturers to come into India and create low cost devices.”