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July 27, 1998


Hardware industry sends out an SOS

Email this story to a friend. The domestic computer hardware industry is struggling for survival. It is sandwiched between multinational brands that enjoy preferential status and the cheap grey market that plays a dominant role.

Industry leaders have pointed this out to the Prime Minister's Taskforce on Information Technology, which held a daylong sitting in Bangalore
Chopping off chips
H-1B visa cap
Hardware SOS
Exim Bank sops
on Saturday.

The presentations said that India's hardware industry, which has a less than 0.1 per cent share of the global market is shrinking. And every year policy changes are making imports easier than manufacturing. The demoralised industry is seeing paltry investments coming its way.

Manufacturers Association for Information Technology President Manu Parpia and President and Chief Executive Officer of HCL Infosystems Ajai Chowdhry called for support from the taskforce for the Rs 25 billion sector which provides employment to over 75,000 people.

Fluctuating and lopsided duty structure, besides a series of errors and omissions by the government have left the domestic manufacturing sector neglected, Chowdhry claimed.

According to him, in the home PC segment, the domination of grey market is as high as 76 per cent. In other computer sections it is around 46 per cent. While duty on components has been reduced from 40 per cent in 1994 to 10 per cent in 1998, the levy on full machines has been reduced from 80 per cent in 1994 to 20 per cent in 1998.

The dismal picture notwithstanding, Chowdhry feels there is tremendous opportunity because "a talented labour force has proved that the country has the wherewithal for hardware design and manufacturing".

However, a number of major companies, which had made investments in computer hardware, are making huge losses. Their units can produce 100,000 computers a month but are producing 100,000 units in one full year, Chowdhry said.

Seeking advancement of duty drops for parts and components Parpia and Chowdhry pointed out that despite positive overtures by the government in the form of reduction in customs duty and increased depreciation on computers, the negative aspects are overburdening. They felt there is an immediate need for specific measures to curtail the grey market.

Chowdhry also called for providing infrastructure status to the computer hardware industry so that it could gain the investment benefits that are available to the telecom sector.

Welcoming the decision to increase government investment in the computer sector to 3 per cent from the current 1 per cent, he wanted the assurance that when tenders for purchasing computers are called, the tag 'multinationals preferred' be removed.

Parpia felt that import and export processes and procedure are archaic, time consuming and designed to slow down business. He claimed all existing schemes are too complex to implement and monitor.

He urged the taskforce to recommend incentives to encourage investment besides allowing merger of facilities for domestic and export production to harness economies of scales.

He wanted the government to allow customs clearance by self-assessment and provide a stable regime with all inputs available at nil duty.

The aim should be to build on the competitive advantage of the country, which has technically trained manpower.

He also wanted the government to set the customs department an export target instead of collection target and raise the limit on invoice through banks from the current $25,000 to $1 million for imports.

He called for the formation of a separate government organisation to implement 'electronic data interchange' with all clearances done electronically by emulating the National Stock Exchange model.

MAIT has indicated that the industry is likely to have a domestic market of $21,650 million in 2005 with the total hardware market expected to be worth $26,650 million, almost 15 times more than the achievement last year.

The total employment potential of the industry in 2005 has been estimated at 900,000. Parpia said the vision is in fact less ambitious considering the fact that the current penetration level per 1,000 of the population for personal computers is 350 in the United States, 160 in Japan, 3 in China and 1.8 in India.


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