Guest Article: Set-top boxes: The long vision ahead

The Government of India in the Union Budget for 2009-10 increased the basic customs duty on digital set-top boxes from 0 per cent to 5 per cent to encourage local manufacturing. As a business case, we fully understand the sentiments of the operators and their point of view as a major part of the set-top boxes are being imported from China, and this additional burden will affect their cost subsidy by about Rs 80 to Rs 100 per set.

We feel Indian-manufactured products will have better control over development, quality, flexibility, inventory management, foreign exchange mitigation, fast ramp-up and serviceability, among other factors, and these are some hidden costs that can easily save the operators over and above the 5 per cent they’ve had to pay as customs duty.

Also, there have been operators in India, mainly the TataSky, who have actually pushed their set-top box partners from Korea and Europe to create manufacturing base in India and most of their volumes have all come from productions done in India over the last few years. These companies were always struggling with no incentives coming from the Government to promote and appreciate their efforts, but they still survived and did good volumes. This effort of the Government finally acknowledges their efforts, and we are sure they will take this as a strong boost to their initiatives and will make their products far more competitive than the competition.

A step forward

Looking at the forward-looking step taken by Government of India, there was always a duty on set-top boxes when they were initially being imported into India, and once CAS was announced in certain zones of the country, it was removed in the Union Budget for 2006 as the production capacities were not there and there was almost negligible production in India. Since then, world’s top companies like Humax, Thomson, etc., have been producing set-top boxes in India for their operators and doing the same quite successfully, and even other consumer electronics companies have geared up capacities to manufacture set-top boxes in India. The latest is Videocon, with its facilities in Aurangabad for manufacturing in India for its own DTH project.

These are tough times across the world and every country in the world wants to increase avenues for employment and growth. Manufacturing is one such key industry in India, and we feel consumer electronics will be a key driver among other sectors in driving manufacturing. The Government of India realises the same, and seeing from the example of mobile, where the Government once allowed manufacturing, Nokia Chennai recently became the largest volume production factory of Nokia worldwide.

This is where the long term vision of the Government is creditable. They want to increase manufacturing of set-top boxes, LCD, etc., and they have taken steps towards the same, and these steps are the indicators of how far Government is ready to move to give opportunities to local companies in India to raise their hand and deliver a quality product at competitive prices to the Indian operators, and also in the process grow local industry in components, sheet metal, cables, gift boxes, marketing, etc., to cater to the new industry demands.

This will also provide opportunities to entrepreneurs in India to enter this industry and create their own brand of set-top boxes with strong in-house R&D and giving impetus to employment of engineers and administrators as well in times to come.

The capacity to produce set-top boxes is there and can be ramped up quite fast once the set-top box companies decide to manufacture in India, and if the operators show a great support to this process of the Government, they will definitely see a process to produce set-top boxes locally in India start much sooner than they anticipated. This will give a boost to R&D in EMS activities in India, and in the meantime, hopefully some Indian companies will take the initiatives and steps to start making Indian brand set-top boxes as well and also start creating industries to cater to the needs of the manufacturing industry as well for components, etc.

Increase in local manufacturing gives employment to all strata of people – from workers to engineers to administrators, etc., increases Government revenue on excise duty, reduces foreign exchange outflow, and also with the right quality and attitude, can give the push India so wants to realise its potential to also become a leading manufacturer for export of set-top boxes to across the world.

Echostar, one of the largest operators in the US, has been importing set-top boxes from India for itself from EMS companies for several years, and this showcases the potential India has. We must move ahead and grow to our potential in years to come. Growth in India of Indian made set-top boxes will help the country cater to international demand, which at present is controlled by China.

China does not allow the import of set-top boxes by any of its manufacturers in a bid to promote its local manufacturing industry. They have imposed high duty on import of set-top boxes from EU if they are manufactured outside EU. Then why is our industry taking the short term view and not supporting the Government in its strong endeavour to promote the local industry, which in the long term will actually be a great boon to the Indian operator itself.

We feel there are other ways by which the Government can support the operators in rationalising their demands for tax structures, etc., but this move from the Government needs to be hailed as a strong step in their efforts to look far ahead and create a win-win situation for all the parties concerned.

Let the people of India also give support to the operators by demanding indigenously manufactured set-top boxes, as we never know how many people and their families are directly or indirectly affected by the rise of this next sunrise industry, that is Digital Pay TV.

We all must appreciate this move.

(Amit Kharbanda is Executive Director, MyBox Technologies Pvt Ltd.)

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