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National Policy for Electronic Component Manufacturing

By Spotlight - 30-03-2019

Policies for promotion of electronics manufacturing have been formulated with a long term vision but their implementation has lacked the same tenacity and a long term sustained approach for promoting high value added manufacturing. A suitable policy must support large investments in manufacturing facilities for raw materials, parts, components and PCBA/EMS for electronics. This is the segment of the ESDM value chain where there is concentration of technology and requires R&D, IP creation and continuous and consistent investments if we want to create a resilient value chain in the country. This is the only way to reduce our dependence on imports and also reduce the insecurity and uncertainty which accompanies it. 

The electronics manufacturing sector can be broadly classified into three tiers:
⦁    Finished Products
⦁    PCB Assembly / EMS
⦁    Components, Parts & Raw Materials

Component manufacturing
A strong component manufacturing base in the country is a pre-requisite for a self-reliant ESDM sector in the country. In the recent past, the focus of policy makers is on manufacturing of electronics products irrespective of the degree of value addition. Majority of inputs such as parts, Sub-Parts, Components are allowed for import at zero or minimal duty. This policy has encouraged low value added manufacturing/assembling but simultaneously has stymied the growth of the existing component manufacturing base and FDI in the sector.
Large Foreign or Domestic investments in electronic component manufacturing will happen only if India offers a cost advantage in component manufacturing. It is argued that low value added manufacturing would result in investments in component manufacturing due to demand pull. However, even low value added manufacturing will sustain if duty benefits are allowed to continue over time with increasing value addition under a PMP program.  


Challenges for Component manufacturing in India
1.    Allowing zero duty imports of inputs/components for the assembly of high volume and high growth products such as mobile phones, PoS Machines, Micro ATM’s, Set Top Boxes etc. has depressed growth in demand of components and discouraged new investments in the segment.
2.    Tedious process and obligations to avail benefits under Cust. Notif. 25/99 on inputs for the manufacture of components.
3.    High Cost of Finance becomes a greater disadvantage with greater value addition 
4.    Duty Free imports of PCBA’s reduce the demand for domestically manufactured PCB & components.
5.    Existing eco-system of component manufacturing in the country lacks global scale and capability and thus remains uncompetitive. 

A two pronged approach to encourage high value added manufacturing:
1.    Provide differential duty benefits/BCD protection to assembly of equipment, specially high volume products such as Mobiles, Tablets, Set Top Boxes, POS Machines etc under a 5 year PMP program with graded increase in Value addition
2.    Distribute components into ITA-1 and Non-ITA-1 categories and provide 10-20% protection. 


A.    Industry & ELCINA recommendations to encourage electronics components manufacturing: 


a.    Fiscal Incentives
1.    Divide components into ITA-1 and Non-ITA 1 categories and further into two categories of below 30% Value Addition and >30% Value Addition. Target minimum 10-15% protection to components                         with <30% VA and 15-20% protection with >30% VA.

2.

Category

Value Add

Target Support

Recommendations

Non-ITA-1 components

>30%VA

15%

BCD 15%,

Income Tax Holiday

Non-ITA-1 components

<30% VA

10%

BCD 10%

Income Tax Holiday

ITA-1 Components

>30%VA

20%

Income Tax Holiday;

Disallow CGST Credit to importer of these components

Refund of CGST paid on local inputs to manufacturer of these components

ITA-1 Components

<30% VA

15%

Income Tax Holiday;

Disallow CGST Credit to importer of these components


3.    Denial of Input Tax Credit in GST Regime: The credit on CGST content charged on the import of finished equipment should not be allowed. This will encourage local manufacturing of electronic equipment by making the imported items costlier. Further, the CGST paid on domestically manufactured inputs (Raw Material, Components, Intermediate goods) used in manufacturing by these finished equipment manufacturers should be refunded. This will incentivize purchase of domestically manufactured inputs/components. A list of selected items has been annexed keeping in mind the production possibilities in the country. Refer Annexure 1(Electronic Equipment), 2 (Components) and 3 (ICTE & Security Products) for list of products.

4.    Capex subsidy under MSIPS: It is a well-documented fact that disabilities increase with value addition. ELCINA proposes three slabs of Capex subsidy under MSIPS scheme. The value addition is the lowest at product level, higher at component manufacturing level and highest at Semiconductor and ATMP level. The MSIPS Capex subsidy grading is recommended as follows:

 

Sl. No.

Electronic Item

VA Range

MSIPS Subsidy (%)

1

Product

10-20%

20

2

Component

20-50%

30

3

Semiconductor/ATMP

>50%

40

 

5.    MEIS Benefits proposed to ensure adequate support:

Sl. No.

Electronic Item

MEIS Incentives (%)

1

Product

3

2

Component

5

3

Semiconductor/ATMP

7

 

6.    Production Subsidy/OPEX benefits: This provision has been introduced under the MSIPS Scheme vide notification of 3rd August 2015 including high value added items such as semiconductor wafering, logic microprocessors, IC’s and added new components such as PCB, discrete semiconductors fab, Power Semiconductors Fab and ATMP etc. This provides for a 10% Production Subsidy on the value addition by the manufacturing unit. Thus higher the value addition, higher the subsidy and vice versa. Production Subsidy should be extended to include all components & raw materials which are covered under ITA-1 and are subject to Zero Customs Duty.
OPEX benefits based on value addition will go a long way in enabling manufacturing of electronic components.  


7.    Benefit through Direct Tax: Finance Cost, Energy Cost and Logistics/Transportation are the three main measurable contributors to disability costs. It is recommended that weighted deduction in respect of Interest paid, Power cost and Freight in proportion to the disabilities is provided for as a deduction in Profit Before Tax (PBT). These are auditable costs and are included in Statutory Financial Statements of companies. Thus allowing deduction of twice the cost incurred while computing taxable income would set off 2/3rd of the disability cost assuming 33% Corporate Income Tax.


8.    Deemed export status for the manufacture of ITA-1 items:
a.    Special Imprest License/ Duty considerations and Advance Intermediate License 
b.    Deemed Exports Drawback Scheme i.e, on the Deemed Exports, Drawback at the rate fixed by the Ministry of Finance for the goods which are physically exported. 
c.    Refund of terminal CGST (earlier it was excise duty) ie., CGST  if any paid, on the goods supplied under Deemed Exports is refunded  
d.    In respect of supply of capital goods to EPCG license holder, the supplier shall be entitled to the benefits stated above except, however, that the benefit of Special Imprest License or Deemed Export Drawback Scheme shall be available only in case of supplies made to Zero duty EPCG license holder. 
e.    Export incentives/benefits under Foreign Trade Policy Schemes (MEIS) 

a.    Measures to Increase Demand of Locally Manufactured Components

9.    Electronic Components must be excluded from all future FTA’s and try to identify remove them from existing FTA’s 
10.    PCB Assemblies for non-ITA-1 equipment should be subjected to 10% customs duty. The Input Tax credit should be disallowed on CGST paid on import of these PCB assemblies.
11.    India is a signatory of ITA-I due to which 217 tariff lines along with all items/parts/sub-parts used in their manufacture are allowed at zero customs duty. To prevent the decline and enable viability of ESDM manufacturing in India a BCD of 15% should be imposed on all non ITA -1 items.
12.    Strict implementation of PMA/PPO Scheme and inclusion of more equipment under the Scheme is essential to drive domestic demand. The list of items may be expanded after due deliberations with industry stakeholders. Judicious inclusion of manufacturing processes and assemblies/components for qualifying for PMA/PPO benefits will result in driving local manufacturing and value addition.
13.    In the scheme the condition of L1 is impossible to meet by domestic manufacturers surviving with various identified disabilities. Computation of L1 should be done considering disabilities for domestic manufacturers and provide them a 5-10% cushion. They must get favourable payment terms to reduce their finance costs. 
14.    Incentivising “Design in India”:
15.    The Make in India campaign can only be successful when the thrust will be on “Design in India”. This will drive demand for indigenous components/PCBA’s and assemblies. Imported designs drive demand for imported components and assemblies, and makes dependent on imported components determined by the customer/owner of the design.
16.    Set Top Boxes are a major manufacturing opportunity and need special attention and protection from unfair imports through FTA routes, specially ASEAN. Indian manufacturers are competing with highly adverse financing by Chinese suppliers and this itself gives a 10-15% cost benefit to Chinese imports. Support through policy and Quality Certifications/BIS will further help in promoting local STB industry.

A.    Promoting Eco-System for High Value Added Manufacturing
17.    Electronic Component Manufacturing Fund: A dedicated fund for the development of Component Manufacturing ecosystem should be floated. This fund may be on the lines of EDF and/or as a separate Venture fund with government’s equity and monitoring mechanism. This Venture Fund should be eligible for Income Tax breaks on its earnings and thus provide low cost capital to high value added electronics manufacturers.

18.    Component oriented EMC’s: High Cost of Land has always been a hindrance for investments in Component manufacturing. ELCINA recommends a dedicated EMC policy for component manufacturing supported with EMS companies. This should be on a PPP model, where land will always remain with the government provided on favourable long lease terms in favour of manufacturers. This will allow manufacturers to invest in manufacturing rather than engaging in the acquisition of land at a premium price and run short of working capital.


19.    3-4 Specialized EMC’s should be planned to establish the eco-system for components. These EMC’s could individually focus on high volume and high growth component groups such as PCB’s, LED’s, Sensors, Wound Components, Switches and Relays. To encourage manufacturers, specialised testing and R&D/Prototyping facilities should be provided in these Clusters.

20.    Government campaigns such as Digital India should be used to spur domestic manufacturing capacities: Demonetisation created a demand for PoS machines and Micro ATM’s. Bharat Net, Smart cities, IoT, Electric vehicles initiative etc. are big government programs which boost the demand for electronic hardware. Advance planning to launch these programs would help in boosting domestic electronics manufacturing rather than depending on imports.

21.    Credit Default Guarantee for Electronics Manufacturing
⦁    Electronic Manufacturing industry is facing challenges to set-up electronics manufacturing facilities in India because of high cost of investment involved and lack of adequate credit facilities. 
⦁    Most of these machinery is required to be imported. Considering the significant amount of investment involved, procurement has to be done on credit basis; either by availing bank loans / bank guarantee. 
⦁    The banks in India require at least 100% of the loan / guarantee amount as collateral for extending credit facilities. Such collateral requirement poses challenges for growth and hence, there is a need for the government to enable banks / financial institutions to extend credit default guarantee for facilitating import of capital goods.
⦁    Electronics equipment funded through a loan from banks / FI's for a tenor of 4 - 5 years for which the Investor shall pay an upfront amount of 20% of the total value. The Government of India shall extend Credit Default Guarantee for 50% of the total value covering the entire tenor of the loan. 
⦁    This credit default guarantee shall be extended to the financial institutions / banks who provide the lease
⦁    Credit Default Guarantee for Domestic Sale of Electronic Products and Components. This will go a long way in boosting investments in Electronics Manufacturing.

⦁    Similarly as there is inadequate ecosystem in India for components, hence 70-80% of all components and even final electronic goods are imported. Currently, the importers of components enjoy 3 - 6 months credit from Chinese exporters.  Such facility has been enabled by SINOSURE, the China government owned insurance company to promote exports. 
⦁    This helps the importers as a working capital bridge to realize cash and effect payments for the imports over the 3 - 6 month credit period. 
⦁    Hence, the Indian industry prefers to import components and equipment rather than buying from the domestic manufacturers. 
⦁    Once the manufacturing facilities are set-up as stated above, the components can be procured locally and substantially reduce import dependence. 
⦁    It is proposed that Central Government should extend Credit Default Guarantee covering 25% of the value of the sale of domestically manufactured components and electronic products for a tenor of 3 - 6 month period and support local manufacturers by incentivizing purchase of their components/products.

B.    Recommendations for Printed Circuit Boards Manufacturing

PCBs are the backbone of Electronics Industry and are required in all electronic products. To boost electronic manufacturing in the country it is important to have adequate PCB manufacturing capacity that meets the need of the industry at competitive prices thereby preventing excessive dependence on imports. At present almost 80 to 85 % of country’s PCB requirements are met through imports.

The main reasons for the low share of indigenous production are as follows:
⦁    Large Capital investments required for setting up PCB manufacturing unit, inhibiting manufacturers to set up new units, especially for multilayered PCBs, which are expected to grow at a significant rate. 
⦁    Inverted duty structure, as inputs for manufacture of PCB’s are subject to 5 to 10% Customs Duty while PCBs attract Nil duty under the ITA-1.
⦁    Lack of availability of skilled labor
⦁    Lack of availability of raw materials like, pure grade silicon, Copper laminates, required for fabrication of the printed circuit boards. 
⦁    Lack of availability of raw materials at competitive prices. 
⦁    Lack of access to new technology and state of the art capital equipment 

Fiscal Support
The main reason for lack of large investments in PCB manufacturing is that PCB’s are subject to zero BCD under ITA-1 and most PCBA’s are also imported at zero duty. Cost of imports from China and other leading countries such as Taiwan and Korea are attractive and there is abundant availability of all types of PCB’s, specially the multilayer and high end ones.
Thus local equipment manufacturers prefer to import PCB’s as well as PCBA’s where costs are lower and lead times are short. Designing and prototyping of PCB’s is done quickly in China, Taiwan etc and this is another factor favouring imports.
Large Investments in PCB manufacturing will happen only if local manufacturing is incentivised. The following recommendations will go a long way in boosting local manufacturing of PCB’s :
I.    Capex Subsidy under MSIPS or similar Scheme must be provided and threshold should be reduced to Rs 2 Crores so that MSME’s too can benefit and expand. The present threshold of Rs 5 Crores is high for Small Units. MSIPS should be extended to manufacturers of inputs for PCB’s as these are not manufactured locally.
II.    Opex Subsidy either by way of 10% Production Subsidy on value addition or refund of IGST paid on inputs for a period of 5 years to the extent of Capital Investment.
III.    As BCD cannot be imposed on PCB’s, an alternative is to disallow credit of CGST portion (9%) of GST imposed on imported PCB’s
IV.    Impose 10% BCD on all imported PCBA’s for non-ITA-1 electronic equipment. This will encourage local PCB assembly/population and boost demand for local PCB’s.
V.    MEIS benefit of 7% for locally manufactured PCB exports (the present 2% is too low)
VI.    Phased Manufacturing Programs are being prepared for a number of high volume Electronic Equipment and this will drive demand for local components. PCB’s and PCB Assembly should be given special focus and eligibility benefits in these programs so that PCB’s are sourced locally and PCB assembly is done locally under these programs.
(Note: Recommendations made above in Section [B] are relevant for PCB also].

Eco-System Support through PCB Manufacturing Zones/Clusters
There is a need to set up at least one large PCB Cluster in India to establish the eco-system for this critical component:

I.    Sustainable PCB manufacturing requires good quality water & power in abundant quantity. It is necessary for the government (whether state or central) to provide infrastructure at subsidized cost to the industry and the following key facilities should be provided:
II.    Good quality and quantity of water. PCB requires plenty of water during manufacturing. 
III.    Generates pollutants which need to be treated through a high cost effluent treatment plant before it is discharged in the common drains. The manufacturing cluster should therefore have a centralised incoming water treatment unit as well as ETP at the discharge side. 
IV.    PCB manufacturing also generates significant solid waste needs to be transported to approve land fill site. The land fill site needs to be provided by the State Government.
V.    PCB manufacturing is a semi-continuous power intensive industry. Continuous, adequate & good quality power is necessary for successful operations.
VI.    The PCB Cluster must have a centralised warehousing facility for imported inputs like laminates, prepregs, copper foil, photopolymer films & photo-tools, solder mask inks & drill bits etc. Some of these items will require air-conditioned and deep freeze environment due to shelf life issues.
VII.    Skilled manpower is required for PCB manufacturing and the industry is labour intensive hence provides large scale opportunity for employment at post school, ITI & diploma level educated workforce. 
VIII.    Capital Equipment for PCB Manufacturing is largely imported and maintenance is a major challenge and cost due to dependence on foreign suppliers and technicians. Local technicians need to be trained for maintaining high precision PCB manufacturing equipment to avoid excessive downtime and cost and ensure good quality sustainable manufacturing. Support for skilling of manpower is important and a key part of the PCB eco-system.


Policy Recommendations for EMS Industry

Introduction & Background

Electronic Manufacturing Services (EMS) or Electronic Contract Manufacturing is a well-established business model for the Electronics Industry worldwide. 

The expanding functions which EMS is delivering in the electronics value chain include component assembly, engineering & design of printed circuit boards, sub-assembly manufacturing, and functional testing offered by contract manufacturers, are subsequently expected to drive the contract manufacturing services market growth.

The EMS model is driven by a contract manufacturer’s ability to specialize in economies of scale in production, industrial design expertise, raw materials procurement, and pooling resources along with offering value-added services such as warranty and repairs. These allow OEMs to avoid having tedious or complex large-scale industrial operations.

The global electronic contract manufacturing and design services market size was valued at USD 348.2 billion in 2016. 

By working with EMS companies, customers can vary their cost structure, reduce working capital requirements, and lessen the time to market. On account of these factors, the electronic contract manufacturing services market is expected to gain traction and also increase its share in the ESDM value chain.

Varying estimates regarding size of the EMS industry in India have been presented by different research agencies. These range from as low as US$ 4Bn to US$ 15Bn during the period 2016 to 2017. As per industry assessments, a realistic estimate of the current size of EMS industry in India would be ~US$ 9-10 Billion. This is about 20% of the total ESDM manufacturing in the country and highlights the importance of EMS segment. For India, EMS has a special role to play as a driver of demand for components, support design of equipment, increase value addition and generate employment as we move up from the SKD to CKD model of equipment manufacturing.

In view of the above, EMS needs special attention in our ESDM policies and eco-system. It has the highest and imminent potential for growth well in excess of 20-25% per annum and an EMS industry of about US$ 30 Billion in next 5 years.

Make in India can be a reality only if the investor is reasonably assured of profitability. At present this is not the case and it is much safer and easier to import or at best follow the SKD assembly model.  This needs to change urgently if we want to reduce our dependence on imports and also reduce the insecurity and uncertainty which accompanies it. 
The electronics manufacturing sector can be broadly classified into three tiers:
⦁    Components, Parts & Raw Materials
⦁    PCB Assembly / EMS
⦁    Finished Products
Each segment of the value chain above is characterized by different levels of Value Addition and requirement of Capital and Technology. India needs to pay heed to these factors and make its policies accordingly. EMS has a key role in enabling Make in India in the ESDM sector and its growth would galvanise the entire value chain including components, raw materials and design.

Recommendations

1.    Import Duty on Populated PCB’s (Assembled Boards): Zero duty import of PCBA’s discourages value addition in ESDM sector in India. This also inhibits the manufacturing of Components in the country. ELCINA recommends that 10% BCD should be imposed on all PCBA’s (other than ITA-1 items) to encourage value addition in the country and growth of EMS sector. 
PCBA’s used for the manufacture of Set Top Boxes, Inverter AC’s, Solar, Wind energy equipment and other electronic finished goods should be identified and protected from any further FTA’s. 

2.    Threshold Limit for EMS vertical in MSIPS Policy: MSIPS has been an important and attractive policy for inviting investments is ESDM sector. However it has faced some challenges in implementation and needs tweaking of the Scheme to make it more effective and achieve its objectives.
Presently, the threshold investment limit for availing MSIPS benefits for EMS vertical is INR 10 cr. This is high in comparison to average stand-alone investments in the sector. ELCINA recommends that this threshold limit for EMS vertical for MSIPS benefits should be reduced to a reasonable limit of INR 5 Cr. This will help in encouraging the investments in the sector, enable MSME’s to participate and expansion of existing EMS companies. 

3.    Phased manufacturing program:
PMP has yielded satisfactory results in the mobile phones manufacturing sector and has promoted SKD level manufacturing. 
ELCINA recommends that similar PMP programs should be announced for LED Lights, Set Top Boxes, Inverter AC’s, Security Equipment along with various other electronics equipment as identified by stakeholders of ESDM Industry. To qualify as a domestic product, VA norms need to be defined realistically and increased within a time frame of 3-5 years to reach minimum 50%.
Encouraging EMS through PMP programs is vital as been proposed under the PMA Policy where the entire value of locally populated PCB’s are taken as domestic value. This will go a long way in promoting EMS. 

4.    Provision of Interest Equalisation to compensate the high cost of finance in the country: 
Reserve Bank of India vide Cir. No. 1/13.05.000/2015-16 dt 11th February 2016 has announced “Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit”. Similar scheme has also been announced by DoT (Department of Telecommunication) vide Circular No.18-34/2013-IP. Dt. 28th October 2016, these schemes are offered to the exporters of selected items. Domestic manufacturing also saves/earns forex by means of import substitution. 
Interest equalization should also be offered to the domestic manufacturers of all ITA-1 items (including PCBA’s) on deemed export basis.

5.    Credit Default Guarantee for Electronics Manufacturing
A.    For Capital Goods: (For Purchase of Capital Equipment)
⦁    Electronic Manufacturing industry is facing challenges to set-up electronics manufacturing facilities in India because of high cost of investment involved and lack of adequate credit facilities. 
⦁    Most of these machinery is required to be imported. Considering the significant amount of investment involved, procurement has to be done on credit basis; either by availing bank loans / bank guarantee. 
⦁    The banks in India require at least 100% of the loan / guarantee amount as collateral for extending credit facilities. Such collateral requirement poses challenges for growth and hence, there is a need for the government to enable banks / financial institutions to extend credit default guarantee for facilitating import of capital goods.
⦁    Electronics equipment funded through a loan from banks / FI's for a tenor of 4 - 5 years for which the Investor shall pay an upfront amount of 20% of the total value. The Government of India shall extend Credit Default Guarantee for 50% of the total value covering the entire tenor of the loan. 
⦁    This credit default guarantee shall be extended to the financial institutions / banks who provide the lease.
⦁    Credit Default Guarantee for Domestic Sale of Electronic Products and Components. This will go a long way in boosting investments in Electronics Manufacturing.

A.    For Components, PCBA’s and Electronic Products: (For Export)
⦁    Similarly as there is inadequate ecosystem in India for components, hence 70-80% of all components and even final electronic goods are imported. Currently, the importers of components enjoy 3 - 6 months credit from Chinese exporters. Such facility has been enabled by Sinosure, the China government owned insurance company to promote exports. 
⦁    This helps the importers as a working capital bridge to realize cash and effect payments for the imports over the 3 - 6 month credit period. 
⦁    Hence, the Indian industry prefers to import components and equipment rather than buying from the domestic manufacturers. 
⦁    Once the manufacturing facilities are set-up as stated above, the components can be procured locally and substantially reduce import dependence. 
ELCINA recommends that Central Government should extend Credit Default Guarantee covering 25% of the value of the sale of domestically manufactured components and electronic products for a tenor of 3 - 6 month period and support local manufacturers by incentivizing purchase of their components/products.

6.    Production Subsidy: Provision for a 10% Production Opex Subsidy on the value addition by the manufacturing unit has been introduced under the MSIPS Scheme on 3rd August 2015 including high value added items. Urgent implementation of this is recommended. 
ELCINA further recommends that this Production Subsidy is extended to include all components and raw materials which are covered under ITA-1. EMS companies are playing a vital role in the ESDM Value chain. They encourage local manufacturing, value addition and demand for local components and raw materials/parts. It is recommended that output from EMS companies is included in this Production Subsidy. 

NOTE: ELCINA recommends that OPEX based incentives should be considered in addition to CAPEX based incentive offered under MSIPS. The OPEX based incentive may be available year after year for up to 10 years and ensure sustained competitiveness of the industry and this incentive should be value addition based. The subsidy may be tapered off thereafter. 

7.    Recommendations on GST to support domestic manufacturing vis-a vis Imports: ELCINA has been recommending that in order to discourage import of complete products and PCBA’s, the credit on CGST content charged on their import should not be allowed. This will encourage manufacturing of indigenously manufactured electronic equipments by making the imported items costlier. However, it is not clear as to whether this is permissible under the GST Act and process.
An equally effective way to use GST to promote domestic manufacturing would be to refund the CGST paid on domestically manufactured inputs (Raw Material, Intermediate goods, PCBA’s.) used in the domestic manufacturing of electronic equipment.  


8.    Export of electronics Items: Government is all set to encourage exports of electronics item. ELCINA recommends some steps to encourage export of electronics items/components:
a.    Increase in MEIS benefits from existing 2% to 5%.
b.    Allow use of MEIS scrips to pay CGST/IGST as the same were utilized to pay CVD/Excise in the Pre-GST tax regime. 
c.    Benefit of Direct Tax for the profit made by exporting electronics items/components. 

9.    Deemed export status to domestic manufacturing of ITA-1 items: ITA-1 has caused severe harm to the domestic manufacturing of electronics items in the country. Zero duty imports of these items from the countries which have various advantages such as Economy of scale, Low cost of Finance, Better technology and significant support from their governments have become a major challenge for local manufacturers discouraging investment in the sector. ELCINA recommends that deemed export status should be given to the domestic manufacturing of ITA-1 items in the country.