Tuesday, 13 May 2014

Many pending issues for Indigenous Manufacturing

As per the projections made by I&B Ministry and TRAI regarding catering to STB demand by local manufacturers, not much has been achieved so far. Ministry has failed to convince the government about the importance of massive task of digitisation as no incentives have been given to Indian manufacturer to compete with the imports and also no measures undertaken to ensure payment of VAT by MSOs and DTH operators on imported STBs.
In an exclusive interview with Cable Quest, Amit Kharbanda, MD of My Box, one of the first STB manufacturer entering the field, talks about the problems faced by Indian manufacturers in competing with foreign manufacturers.

CQ: What is the present state of STB manufacturing in the country? How much of the market need has been fulfilled by the Indian manufacturers in the last two years.
Amit: Its a tough situation at the moment for both Indian and international manufacturers as the market has seen a major dip in STB requirement after phase II completion. There has been a lot of action on domestic front with a lot many players actually entering the fray to look at local manufacturing and also international vendors and operators looking at manufacturing in India for the big market it is. There are some issues which have to be handled with government and we shall see a major shift to local manufacturing in years to come. The last 2 years has had a sudden onslaught of set top boxes with phase I and II happening quite fast and close to each other. Though time was not enough but still more than 5-6 million boxes were installed from local manufacturing. 

CQ: What is the present capacity to manufacture STBs in the country?
Amit: Capacity to manufacturer locally is not an issue. Our industry association even presented to the Task Force the capacity as given in the table.

CQ:  What are the major hurdles in indigenous manufacturing? Have TRAI and I&B Ministry gone wrong in estimating the manufacturing capability in India while fixing the digital cable deadlines?
Amit: Indigenous manufacturing has to be seen from point of view of local R&D, manufacturing and service or import and manufacturing. Either case it is attractive and possible without any issue except for 2 major hurdles when compared to imports:
    • VAT issue- MSO and DTH operators do not sell the STB to customer so VAT is not paid and this results in non issuance of Consumer Form for products bought locally which makes local manufactured product very expensive as VAT is paid on the same when delivered to an operator adding to their cost which is not there in case of imports.
  • Finance issue- international government and companies get good finance options which they give to operators and very low interest cost for longer period as product is considered as capital goods and long term financing is availed in imports. Also some government gives good financing if product bought from their country only. The same is not possible locally and the interest cost locally in India is very high as all are aware. 
We are not sure what was the estimation done while fixing the digital cable deadline and whether local manufacturing was considered or not or what percentage, so not sure how we can advise whether it went wrong or not?

CQ: What incentives does the industry demand from the government in fulfilling its obligations?
Amit: We have requested for resolving VAT issue till Goods Service Tax (GST) does not come to foray. We have also asked to give us the same incentive as telecom equipment manufacturers got it when faced with same issues few years back that an operator is using the STB in his network only and not selling so they be considered like a telecom network and the product bought locally and not sold further, a Consumer form can be issued which is allowed in telecom and power industry. This helps to solve the issue without putting extra burden on the operators as well.
As for finance, Government if wants growth of digitalisation should ask local Indian banks to consider this and support if not an operator, then maybe manufacturers to help fund at lower cost to give benefit to operator to deploy locally and sell more and more and for local manufactured product only.

CQ: Are DTH and Cable Operators willing to order Indian manufactured STBs?
Amit: We have not seen any operators not willing to buy locally manufactured equipment. Some of them are already buying but issue is that everyone has their business model to consider and work upon. If there landed cost of STB is high and finance is an issue, they will look at other options. We are a democratic country. We need government to be proactive and supportive and I am sure with the hidden advantages of a local product in terms of local support, quality, flexibility, accountability, supply chain management, payment in INR, some percentage foreign exchange fluctuation mitigation etc are all advantages which play a big role if comparison is apple to apple -domestic to imported. There will be something majorly wrong for an operator not to take these factors into considerations and not buy locally manufactured STB if government sorts out the issues of VAT etc.

CQ : Do we have adequate test lab facilities for BIS certification? How much time does it take to get an STB model certified ISI?
Amit: Yes, number of labs is growing. Generally labs are taking 2 to 2.5 months and once lab report is submitted BIS certification takes about a month, so in all 3 to 3.5 months are required, which has to be taken into consideration before deploying boxes. So once a new operator gives order and components etc are being ordered and STB being prepared, box must also be submitted to get BIS approval.

CQ :  Any other issue you wish to highlight?
Amit: I wish to emphasise that the experience of the sub standard boxes deployed due to urgency of the operators and implementation of Phase I and Phase II has made a lot of operators realise that they are not in the business of selling hardware but in the business of service, of providing entertainment and quality TV experience to their customers. To do that instead of going for nothing but cost as a factor in deciding the STB hardware will only lead to failures and net loss of customer. They should find good strong reliable partners who can support and educate operators and work with them always and available 24x7 to help make customer experience better and slowly grow their business from that. This is something a local STB can provide far better than any imported STB and we do feel in moving forward to next two phases. This will play a big role in the growth of domestic STB manufacturing in India in years to come.

Source: http://cablequest.org/articles/broadcast-technology/item/4847-many-pending-issues-for-indigenous-manufacturing.html

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