Customs duty on parts required for open cells has been reduced.

TV prices won’t fall soon despite tax cut on open cell parts



NEW DELHI : Indian consumers may have to wait a while before they see television prices drop despite the government announcing a cut in customs duty on open cell components that comprise more than half the cost of a TV set.

Presenting the Union budget on Wednesday, finance minister Nirmala Sitharaman halved the customs duty on parts to produce open cells to 2.5%, “to promote value addition in manufacturing of televisions.” While this initially got some manufacturers excited about the prospects of passing the benefits to consumers, industry executives and analysts opine that brands will only reap benefits of the revised duties on open cell components once contract manufacturers start local assembly of open cells.

The ‘open cell’ refers to multiple layers that sit between the backlight and the external frame of a television. So far, India does not have large-scale open cell manufacturers. In June 2019, Holitech Technology opened a component manufacturing plant in Greater Noida, Uttar Pradesh. Holitech is among the global component suppliers to Chinese electronics maker Xiaomi.


“The open cell duty revision will have an impact of around 0.5-1% on the total bill of materials (BoM) cost of a TV. Under India’s Phased Manufacturing Program (PMP), there is a direct benefit in margins once components are sourced locally, which saves duties for us. However, this will depend on local manufacturers scaling their local operations since it is only then that cost efficiency will kick in, and the cost benefits can be passed on to consumers. This is not an overnight process,” said Murlikrishnan B, president, Xiaomi India.

Local contract manufacturers concurred, adding that there will be no immediate shift in TV prices, as of now.

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“At least for the immediate future, TV prices will remain the same. The change in customs duty on open cell components will only offer benefits once manufacturers start assembling open cells at scale in India, leading to cost benefits coming from the reduction in duty. As of now, most open cells will need to be imported since India does not have large-scale local manufacturers, and the import of fully assembled open cells are still taxed at 5%,” said Arjun Bajaj, director at contract manufacturer, Videotex International.

The government’s decision to impose a 5% import duty on components needed to make open cells locally, announced in November 2020, have reportedly deterred firms from setting up manufacturing facilities for open cells in the country.

A senior industry executive at a components manufacturing firm, who spoke on condition of anonymity, said Vedanta Group’s proposed display manufacturing plant in India is “a start to making open cells in India.” He added that South Korea’s Samsung had also considered such a plant, while a second industry official added that China’s TCL was also in talks to open such a facility in India. TCL’s plans may have, however, been put on hold, the first executive said.

“There has been resistance in bringing open cell manufacturing to India. It is the same thing that the likes of Japan faced when they started local manufacturing, because such plants require significant investments, and it also costs jobs when you move a plant from one place to another. However, such investments happen when companies’ backs are against the wall, and the correct geopolitical situation is some like that,” the executive added.

According to industry experts, the reduction in open cell component duty, when brought to scale in local manufacturing, could lead to savings of around 800 on a TV priced at around 30,000. “Such savings could be significant given the scale of India’s TV industry, which already ships 14 million units per year as of CY22,” said Tarun Pathak, research director at market researcher, Counterpoint India.

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However, there are multiple challenges to overcome before such local sourcing can be done at scale. “Local sourcing can increase domestic value addition to the manufacturing pipeline, and this duty reduction could be among the first of a series of steps that may eventually lead to some form of a production-linked incentive (PLI) solution to encourage domestic component manufacturing. But, it is a long process, and prior to sourcing the components, we will need to ensure quality checks, certifications and standardizations in procedures, so there is a lot of back and forth in all of this,” Xiaomi’s Murlikrishnan said.

An industry expert, who requested anonymity, added that laying down a single PLI scheme to incentivize the sector could also be a challenge. “Making LCD modules (which are part of open cells) falls under semiconductor fabrication, while optical and polarizing films (also part of open cells) come under glass sheet-making. The inability of India to have a policy that integrates these essential ingredients is another hurdle, which we are slowly overcoming,” he added.


Shouvik Das

Shouvik Das is a science, space and technology reporter for Mint and TechCircle. In his previous stints, he worked at publications such as CNN-News18 and Outlook Business. He has also reported on consumer technology and the automobile sector.
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