DESH could be a great enabler

DESH could be a big enabler

The DESH Scheme, with its core focus on maximizing efficiencies and competitiveness, can be a great facilitator for India to leverage enormous manufacturing opportunities.

BY SASIKUMAR GENDHAM

Salcomp is the market leader in smart phone chargers, & provides power supplies for mobile and other electronic devices. It also produces IoT sensors based on Wirepas Mesh wireless connectivity technology, which enables scalable, reliable, and cost efficient IoT solutions, as well as precision structural parts and modules, 5G RF parts and magnetic materials.

The company has been in India for the last 15 years and operated in an SEZ since the beginning, exporting most of its production. It has produced close to a billion charges in this country over the last 15 years, so it’s a very large-scale operation. 2016 was a major turning point in this journey, when supplying manufacturing chargers from an SEZ to a DTA was taxed at 20%. But there was no tax on supplying from a DTA. So, the same product, which is Made in India, attracts 20% from an SEZ. But when imported, it attracts only 5%. So, there was a big anomaly at that point. This forced the brand to shift from an FTA to a DTA zone. By law, we are forced to have two separate factories with a big fence separating them. Investments have doubled, though there is no need for that. Capacity utilization is not at its best, and that has a severe impact on competitiveness.

From that point of view, we are extremely glad that the new DESH draft is being thought out, so that we can have a homogeneous scheme. Under this proposed scheme, we can operate for both sets of customers – national & international – and optimize our investments.

Salcomp had just about 3,000 people initially; but today, we almost employ 10,000 people, of whom 90% are women employees. And we also took over the Nokia facility – the whole campus is acquired by Salcomp. Our vision is to go to 25,000 people in the next one year. For a company of our scale, we have to hit the billion-dollar mark and go beyond that.

A lot of support is needed from the government when it comes to seamlessly moving between factories – SEZs to DTAs, of course with all the taxes being calculated and paid as it’s supposed to be. All that we expect is flexibility to be able to compete in the global arena. At present, we are not just competing with China; we are rather competing with Vietnam. When things are moving out of China, they are going directly to only two countries – India and Vietnam. A lot of electronics manufacturing is coming to India, but we have to get our act right, to be able to capture this opportunity at hand.

The DESH scheme has taken into account most of the problems we have been talking about, like the physical differences between SEZs and DTAs. And the core focus is about improving efficiency, utilizing capacities, and then gaining competitiveness. And then there is the critical question of giving up on net foreign exchange (NFE) criteria.

All we expect is to have seamless transactions between SEZ and DTA, so that we can use the capacities as much as we can. And the second thing is that most SEZs have now been notified as multi-sector. But there is still this ‘50 hectares’ minimum requirement. That has to be out as well, because it’s not serving any interest going forward. And the third point is utilizing common facilities. The electronics industry entails very high investments in testing and approval points. So we need to have one facility that we can use for both SEZs and DTAs and move forward with that.

I would propose that we can have seamless deployment of these resources, whether for SEZ or DTA operations. Fiscal incentives are a separate issue altogether. Ease of doing business is going to be the biggest ask. In that direction, I am positive that the DESH Scheme will be a big enabler.

_____________________________ Sasikumar Gendham is MD, Salcomp Manufacturing India Pvt Ltd. Views expressed are personal.