• Fri. Mar 1st, 2024

IT Gear companies get a year’s worth of import relief

ByNishat Manzar

Sep 23, 2023
It

A new import management system states that businesses like Apple, HP, Lenovo, Dell, and others would have a year to freely import IT gear into India.

New Delhi: A new import management system that goes into effect on November 1 will provide Apple, HP, Lenovo, Dell, and other businesses a one-year window to import laptops, PCs, servers, and other IT hardware items without restriction, according to three individuals with knowledge of the development.

On Friday, the firms attended a meeting on the import management system where the ministry of electronics and information technology informed them of this, the sources said on the condition of anonymity.

The government will start enforcing limitations, beginning in November 2024, lowering the proportion of imports authorized each year, and this flexibility is meant to enable businesses to build local manufacturing capabilities.

“Registrations for the import management system will start on November 1; but, import limitations won’t take effect for another year. The limits will have a sunset clause in 2030, after which it will be reconsidered, according to one of the individuals mentioned above.

After November 2024, import volumes will be based on a number of variables, such as the volume imported the previous year, the volume of locally produced goods, and the volume of goods exported from India.

According to a second source, “the industry has recommended that FY23 not be kept as the base year for determining the import quantities since it has been a low-performance year for most companies in the IT hardware space.”

Executives who were privy to the meetings stated that most businesses were eager to start local manufacturing by 2025, with some perhaps starting the following year. This is in line with the production-linked incentives (PLI) plan for IT gear, which offers qualified enterprises rewards totaling Rs. 17,000 crore over six years and covers laptops, tablets, all-in-one PCs, servers, and ultra-small form factor devices.

As of Friday evening, representatives from Meity, HP, Dell, Apple, and Lenovo have not returned calls.

Companies may start using the scheme’s incentives in either FY24 or FY25. The government anticipates 5,000 crore in investments, creating 75,000 new direct jobs and 4.7 trillion dollars’ worth of additional output.

According to a third individual with knowledge of the meeting’s specifics, “the government has assured that there will be no supply chain disruptions, which will also help to ensure that companies wanting to build their local manufacturing capacities face any hiccups.”

To allow the import of laptops, servers, and other IT hardware items from reputable jurisdictions, India aims to implement the import management system. There will be a cap on the number of units that may be imported from unreliable areas. In an interview last week, Rajeev Chandrasekhar, the minister of electronics and IT, remarked.

India first proposed limiting imports of IT hardware products in the first week of August, but the implementation was postponed due to objections from the sector, which claimed that the abrupt halt would negatively affect customers and boost costs.

Many US-based businesses also sought government support for action to remove the import restrictions. Notably, US trade representative Katherine Tai expressed concerns about the policy on import licensing requirements and the need to avoid a negative effect on US exports to India at a meeting with commerce minister Piyush Goyal last month.

Imports of IT hardware increased 50% The DGFT banned the import of IT gear last month: Requiring a license, then lifted the restriction in August from July.

Prior to the new licensing requirements taking effect on November 1st, India’s imports of IT hardware increased by as much as 50% in August from July. Last month, the Director General of Foreign Trade (DGFT) added servers, laptops, and other IT devices to the restricted list, requiring a license. As a consequence, businesses worry about a supply shortage.

The notice, which was approved on August 3, was changed the next day, delaying implementation until November 1 to give the sector three months to reassess. According to a media report by The Economic Times, the injunction has nonetheless raised concerns about supply interruptions and price rises if the limits take effect.

Due to an increase in orders from original equipment manufacturers (OEMs) and business clients who want to guarantee enough inventories throughout the holiday season and for corporate purposes, imports in August surpassed 1.2 million units, up from 800,000 in July, an analyst stated. An industrial coalition estimated the import surge at 20–30%.

According to a senior executive at a multinational IT hardware firm, businesses are also wary of purchasing equipment built in China for the simple reason that the government may one day forbid their usage. China’s Huawei and ZTE are essentially prohibited from taking part in India’s 5G rollout in the telecom industry. For instance, Lenovo hasn’t bid on any government contracts in the last two years.

Tejas Bagadia is the director of Team Computers, a system integrator with over 2,500 business clients. “Lots of global companies that have their shared services here — Amazon, Walmart, Meta, Google –have reached out to us, and preponed their buying plans,” he added. They had intended to purchase extra over the months of October and November, but they have already begun to do so early in anticipation of a scarcity once the notice takes effect.

Bagadia said that as late as last week, he was receiving enquiries from international companies concerned about a disturbance brought on by new staff who lacked machinery.

There has been a 27–28% increase in clients who originally intended to buy equities in November but have now shifted forward to August, according to Bagadia.

 In fact, a number of brand-new clients have gotten in touch with us.

According to executives, OEMs must get certification from the Bureau of Indian Standards (BIS) before launching a new model. Stocks may not be distributed to distributors for a few weeks due to the implementation of licenses in November.

“Right therein lays the problem. Business continuity may suffer if 100 new employees join and there aren’t enough machines on hand, according to Bagadia. Companies struggled to get enough supplies for workers during the epidemic, so now they are being extra cautious, he added.

According to a senior executive at a leading global IT hardware company and an industry organization, many businesses have begun holding year-round inventories with systems integrator businesses like Team Computers so they may buy them as and when necessary.

One of the executives added, “There are specific models from each OEM that are procured the most by enterprises.” These OEMs have made sure that at the very least these models are suitably available “ever since the second notification came, extending the deadline.”

Global companies have submitted applications for the updated production-linked incentive (PLI) plan for IT gear, which aims to turn India into a center of laptop, PC, and server manufacture. In order to give themselves ample time to build up the ecosystem, they have sought for a further delay of 9 to 12 months before introducing the licensing regime.