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BY the end of the year, a lot of MNCs will set up new manufacturing
units in India, predicts MAIT Southern region President, Mr Vinay Deshpande. ``Thanks to the modified EHTP norms in the new Exim policy,
those who are looking at India both as a market and as an export could take advantage of the new provisions,'' he told Business Line.
This would be driven not just by the Exim policy, but in conjunction with some State initiatives such as setting up special economic zones
(SEZs) and hardware parks, said Tyco Managing Director, Mr Samir Inamdar.
``The SEZ policy also has a higher hassle-free push,'' he said. ``If SEZs come up in good location — like the Karnataka hardware park near
the international airport and the SEZ in New Bombay near JNPT port — it will make things attractive for MNCs,'' he said.
However, Mr Deshpande was not so sure about healthy domestic component industry coming up. ``It is a chicken and egg situation,'' he said. The
component industry is waiting for a manufacturing sector to come up, and vice versa.
Incidentally, Dell CEO, Mr Michael Dell, recently ruled out manufacturing in India, for want of a strong component base. ``But
someone has to take the first step. It is more likely to be the MNC manufacturers (who have more financial muscle power)'', Mr Deshpande
commented.
The three major wins for the hardware industry have been the consideration of sales in the Domestic Tariff Area as fulfilment of
export obligation; net foreign exchange to be calculated over five years instead of annually; and the simplification of export procedures.
Selling in the domestic market is logical because if the products are coming in from abroad duty free anyway, there is no sense in
restricting the EOUs from selling here, Mr Deshpande said. This also offers units the volume advantage and allows integration of manufacture
of products for different markets, Mr Inamdar said.
The calculation of net foreign exchange over a longer period of time will also give the unit more flexibility, felt Mr Deshpande. ``It
provides the necessary gestation period as in most cases, exports cannot immediately happen on commencement of production,'' he said.
The simplification of procedures was the welcome part of the policy. The turnaround time will be reduced, said Mr Deshpande. With minimal
physical examination of import consignments, there will also be a move towards what Mr Inamdar called a ``hassle-free'' regime.
Procedural hassles were a problem for Tyco, and was making the company less competitive compared to other Tyco facilities round the world.
``While India has the basic efficiency, we lose out on the environmental factors hindering exports'' has been the company's
stance.
In the strongly competitive world, further investments by Tyco's parent in India depend on the Indian facility's efficiency. However, other
issues are still to be cleared, on the jobwork front and obsolescence issue, Mr Inamdar said.
The policy has not mentioned either and seems to indicate that trading is disallowed for EoUs, Mr Inamdar said. The relaxed EHTP rules may see
more activity in MNC manufacturing. HP, for one, which had discontinued
its operations from an EHTP unit, now has an option of getting back to it, said Vice President, HP, Mr Ravi Agarwal, speaking to Business
Line.
``We will now evaluate the EHTP scheme again'', he said.
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