Custom Duty Hikes in Union Budget 2021-22 to Boost Domestic Manufacturing

Custom Duty Hike

The Finance Minister, Nirmala Sitharaman presented the budget in the parliament on Monday, amid huge expectations from all sections of people of India. The budget, which is worth INR 34,83,236 crores, is aimed at reviving the economy that has been badly hit by the outbreak of the coronavirus pandemic and the nation-wide lockdowns.

Read: Best Manufacturing Business Ideas in 2021

The government, with an objective to boost the domestic manufacturing and minimize the imports, has decided to increase customs duty on various products like, ACs, refrigerators, washing machines, electronic toys, shoes, leather products, raw silk, solar lanterns, LED lamps, specified insulated wires and cables, gem stones, PCBAs, mobile accessories, power banks etc.

Here is the list of products on which customs duty is increased:

Products Customs Duty Hike
Inputs, parts or subparts to manufacture specified mobile parts such as:

1. Printed Circuit Board Assembly (PCBA)

2. Camera Module

3. Connectors

From 0 to 2.5%
PCBA and Moulded Plastic for manufacture of charger or adopter 10% to 15%
Inputs and parts (other than PCBA and moulded plastic) of mobile charger 0 to 10%
Inputs, parts and subparts (other than PCBA and Li-ion cell) for manufacture of Li-ion battery and battery pack 0 to 2.5%
Compressor for Refrigerator and ACs 12% to 15%
Specified insulated wires and cables 7.5% to 10%
Specific parts of transformer such as bobbins, brackets and wires 0 to applicable rates
Inputs and parts of LED lights or fixtures including LED lamps 5% to 10%
Solar inverters 5% to 20%
Solar lanterns or solar lamps 5% to 15%

Currently, India is majorly relying on imports to meet the domestic demand of these products. With increase in the customs duty, the prices of these products would increase in the country. This will eventually lead to boost the domestic manufacturing of these products.

Read: Opportunities in the Indian Toy Manufacturing Industry 

Barring a few products like, ACs, refrigerators and washing machines, most of the above said products are manufactured by MSMEs. The manufacturing of majority of these products can started with a budget of 1-2 crore, which is a feasible option for new entrepreneurs planning to enter into the manufacturing industry. Also as most products fall under the China substitution products category, chances are higher to get funding assistance from the government. So, it is a great opportunity for MSMEs in the country to start the manufacturing of the products such as electronic toys, shoes and other leather products, LED lamps, solar lanterns, gen stones, PCBs, mobile accessories, power banks, etc.

Budget Allocations for MSMEs

The covid-19 pandemic disrupted almost every industry. But its impact on the MSME sector, which is mostly unorganized, is devastating. Helping the MSME sector, the government has allocated INR 15,700 crore for the sector in the current budget. It is almost double when compared with the last budget’s allocation which was around INR 7,572crores.

Under the Atmanirbhar Bharat scheme, the government had earlier announced INR 3 lakh crore Emergency Credit Line funds for the MSME sector.

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Budget Allocations and Provisions for Manufacturing Industry

Now let us look at some provisions and allocations in the current budget related to the manufacturing industry in general.

PLI Scheme

With a vision to boost domestic manufacturing, the government has committed to spend INR 1.97 lakh crore under the PLI scheme over the new five years for 13 sectors. This spending will be in addition to the INR 40,951 crore earlier announced for electronic manufacturing.

The scheme will create manufacturing champions from India that can compete with global players. It will also help to attract large scale investments and create a thriving ecosystem for MSMEs in the country.

Textile Industry

The government has decided to setup seven textile parks across the country over the next three years.  These textile parks are expected to attract huge investments into the textile industry, boost exports and allow domestic textile companies to become globally competitive.  The government also reduced basic customs duty on caprolactam, nylon chips, nylon fibre and yarn reduced to 5%. This will help the textile industry, particularly MSMEs and boost exports.

Read: Technical Textiles: The New Growth Driver of Indian Textile Industry

Power Sector

The government is planning to launch a comprehensive Hydrogen Energy Mission 2021-22 for generating hydrogen from green power sources. In line with the move, the government has allocated INR 1,000 crore to Solar Energy Corporation of India and INR 1,500 crore to Indian Renewable Energy Development Agency. On the whole, the government has allocated around INR 3 lakh crore to power sector over the next five years to facilitate reforms.

Voluntary Vehicle Scrapping Policy

The government is planning to launch voluntary vehicle scrapping scheme for commercial and private vehicles. Under the scheme, commercial vehicles which are older than 15 years and private vehicles which are older than 20 years will undergo fitness tests. This scheme, which is expected to cover over one crore light, medium and heavy vehicles, will help to prevent unfit and higher polluting vehicles from usage. Apart from this, the scheme will also help to boost the automobile sector by increasing the sales of automobiles. It will help to encourage fuel efficient and environment friendly vehicles in the country.

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Source:

https://pib.gov.in/PressReleseDetailm.aspx?PRID=1693907

https://www.moneycontrol.com/news/companies-2/budget-2021-fm-nirmala-sitharaman-doubles-allocation-to-msme-sector-to-rs-15700-crore-6408941.html

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