Union budget 2021 presented by Nirmala Sitharaman, the Union Finance Minister of India on 01 February 2021 was a turning point and a landmark budget which is appreciated by all sections of industry acknowledging the bold initiatives, intent and paradigm shift in strategic planning to propel the growth of Indian economy on the vision of ‘Atmanirbhar Bharat’,‘Self Reliant India’ and ‘Digital India.’ Muted criticism in a democracy like India proves the degree of acceptance. To me, it gave a feeling of ‘1991 moment’ when India took unprecedented acceleration in reforms. The major structural shift in policy reflects Central Govt’s resoluteness and strong conviction to achieve strategic independence by reduction in imports; unlike in past most of the Govt’s drafted the budget with an eye on the vote bank.
Likely impact on the Private Security Industry (PSI)
The private security industry does not fall into the bracket of manufacturing segment; it is grossly a service industry. This union budget is likely to have a significant impact on the private security industry in the following ways:
- Huge investment in infrastructure development like highways, metro rail, air ports, SEZ and sea ports etc., is going to increase business opportunity for providing security and allied services like toll tax management.
- Disallowing delayed deposit of PF as expenses will compel us to ensure its timely deposit.
- Reduced time limit for reopening of tax assessments to 3 years and establishment of faceless Income Tax Tribunals would reduce harassment.
- Announcement of voluntary scrapping policy to phase out polluting vehicles is likely to impact all PSIs but more so those providing CIT services.
Impact of increase in custom duty on electronic items on PSI
PSAs use a large number of electronic items like mobile phones, surveillance equipment, PCs, servers and related equipment. The increase in import duty on these therefore is likely to increase the cost to the private security agencies. These cost increment would be mostly applicable to the procurement of new equipment. Existing electronic equipment already being held will have the impact only in their repairs or upgrading.
Rationale of Govt’s imposition of additional custom duty
The government proposed to impose import duty on components of mobile phones and chargers as a part of review of 400 exemptions in customs duty including those applicable on the mobile devices segment. Govt cited following rationale for its action:
- To enhance local value addition.
- To align the thrust on easy access to raw materials and exports of value addition.
- To ensure twin objectives of promoting domestic manufacturing and helping India get on to global value chain and exports.
Conclusion
The Central Govt’s move to make India a manufacturing hub by boosting domestic manufacturing and to transform it as part of global supply chain as an intent and strategy not only sounds good but appears to be viable. Domestic manufacturing is getting a leg up in allocation of funds and recent procurement orders for instance are TEJAS from HAL with LCH in pipeline and latest version of ARJUN from DRDO, ATAG gun from Bharat Forge, drones from a startup and ship building. Domestic manufacturers of mobile phones like DIXON Technology and household electrical appliances by Amber Enterprises are likely to scale up manufacturing and reduce share of imports. Even during COVID 19 pandemic Indian domestic manufacturers played vital and major role in manufacturing of PPEs, medical devices, ventilators and ICU beds to reduce dependence on imports. In my view, the rhetoric of ICEA which is umbrella body for the mobile manufacturers should be taken with a pinch of salt. India must be able to gain a position of strength in manufacturing to counter the coercive protectionist trade policies of China and other nations to safeguard its national interests.
