In 2004, after the pay broadcasters managed to get the CAS implementation deferred and the industry was handed over to TRAI for regulations, we expected things to become better organized, benefitting the industry in years to come. TRAI did give its recommendations after carrying out their consultation process and emphasized on various requirements to speed up digitization and restructuring of the industry, for a better growth in 2010, but they we are all ignored. TRAI had also recommended Cable Television to be declared a telecom infrastructure because future of a cable network lies on its conversion as broadband network using the same fibre optic equipment as in a telecom network. Telecom equipment has the advantage of duty exemption whereas the same equipment imported by an MSO has no such incentive.
Government Initiative is not effective
The government has not made any effort to manufacture STBs and optical equipment in the country so far. The TRAI has recently issued a consultation on "Promoting Local Telecom Equipment Manufacturing", with the last date for comments as 13 November and for counter comments as 27 November. However, it has not mentioned about any equipment used in digital cable TV network in spite of the fact that the TRAI Act considers cable TV as a telecom service. If cable TV industry also gets incentives as given to the telecom industry, cable networks can convert all 200 million connections as broadband giving an extreme boost to National Economy.
Although TRAI may be sincerely projecting the requirements of the industry in its recommendations, the government is not sincere in considering them and taking an early action. Neither it accepts nor does it reject them making the whole exercise ‘futile’. Mostly the government fulfills the requirements of large players in its policies for its political and fiscal interests on the basis of reports from lobby groups in CII, ASSOCHAM, FICCI etc. It has no time to consider the demands of small and medium players who hardly get a chance to speak to the Ministry officials or even the Minister. Even the Task Forces are selected in a biased manner to help a particular group. Small players always have to fight for their survival.
I remember when the Cable TV industry started in 1990. There were only 2 or 3 medium level enterprises manufacturing Cable TV equipment and within five year hundreds of small equipment manufacturers sprung in all big cities to fulfill the demands of operators increasing exponentially. Some of them have become medium level manufacturers in the last 20 years but without any help from the government, however most of others have shut their shutters and got into the business of distribution of Chinese equipment, further helping the foreign manufacturers. The reason is that the Chinese equipment, even after import duties, is cheaper than Indian manufactured equipment. The Chinese government gives almost 50 % subsidies for export and encourages growth of manufacturers into corporate whereas in India we throttle our small and medium Industry with red tapism and adhoc policies to meet some short term targets particularly when elections are closer.
Small manufacturers must be helped
Way back in 2000, when these small manufacturers were flourishing in Delhi, most of them operating from residential areas in the outskirts due to lower capital costs, were forced to move out en-mass to rural areas in other states where government had subsidized land. But due to lack of logistic infrastructure, costs increased and also delays in distribution made them suffer heavy losses and they had to shut off or are just trying to survive.
Delhi had no adequate facilities to accommodate these companies. If only the government had encouraged these companies with subsidies and incentives they would have been manufacturing sufficient equipment for the broadband industry needed today.
These small and medium enterprises should be helped to grown in a productive manner, all across the country so that it helps to employ local youth. In due course of time, these companies will become bigger and bigger contributing more to the GDP.
International manufacturers who come to India to establish large scale manufacturing units, do not help the small scale industry and instead, force them to shut down. Their operations become unviable due to high cost of production making them unable to compete with international brands. Also, since these large scale manufacturers have the support of their worldwide network of R&D, distribution and component manufacturing, can produce quality and innovative products at low cost. Our government has no such facility for indigenous manufacturers. These large companies also have sufficient funds to consolidate, buying out other software and content producers as a linear support.
Skilling is an eyewash
We also have no support in education and training. Even today no engineering institute has taken up training on broadcasting equipment or cable TV distribution. BECIL was given the task but it failed to organise a countrywide training programme. Way back in 2006, COFI had suggested to the Ministry and also to a PMO special group on digitization to enable all ITIs to start special courses in cable TV distribution and also make Doordarshan engineers stationed in far off transmitter sites to go to the cable TV operators to help them technically and educate their technicians but none of it was done. Even SCTE, the international society of cable TV engineers has been trying to start technical courses but failed because of lack of support from the government. Skilling of personnel is still very inadequate. Every government prepares the policy to help skill people but the end result is not encouraging because the basic education level is very low. There are hundreds of private management institutes and technical universities in India but students who come out of them hardly have the knowledge and skill to perform according to their qualifications and end up in doing clerical or technician’s job.
The government thinks that the more FDI we get the more economically stronger we become. Unfortunately this again helps the large scale enterprises and corporate. This may be good in high level specialized industries like defence, aviation, ship building, transportation, atomic energy and infrastructure but in other fields, we require nationwide spread of manufacturing hubs. Even policy of ‘ease of doing business’ help mostly the large scale manufacturers. Relaxation in FDI limits help to expand their business further, medium and small players always get bogged down in red tapism, corrupt practices in bureaucracy and various state and centre departments and become disgruntled.
All these policies are mostly on paper. The government might have stopped corruption at the higher level, the lower departments are still carrying on with the same old system.
Double whammy of Demonetisation and GST
Demonetisation and implementation of GST has further added to the woes of indigenous manufacturers. Cable Quest talked to some existing manufacturers and came to the conclusion that the small and medium manufacturers have been impacted very badly, first by demonetisation and then by implementation of GST. Demonetisation finished the cash transactions in the industry which was its main stay. Cable Operators collected cash from subscribers and bought equipment paying in cash. It may take more time for the market to adjust with cashless transactions, till then the manufacturers will keep suffering. There are no large scales manufacturers in the country and many medium and small manufacturing units have been closed down in the last four to five years of digitization, unable to compete with the Chinese manufacturers.
Chinese government is known heavy subsidies and incentives to the manufacturers who export their products. Also, most of the big broadcasters and operators in India have international links operating in worldwide markets and prefer to procure equipment including STBs from the large suppliers in China.Only small MSOs are buying from Indian manufacturers.
As far as GST is concerned, the move is good but the taxation is high and also the loophole of local bodies being allowed to impose tax on top of GST, has nullified the advantage of GST. Every state is trying to levy additional tax on subscriber through the distribution companies to make more revenue.
Anil Maheshwari owner of Maheshwari electronics says that in general 25% to 30 % are down due to cash crunch caused by demonetisation. However, he adds that situation is improving in southern India.
On GST he commented that every company is suffering due to submissions of so much of accounting information and dependency on computer and internet speed. However he's bullish about the ‘Make in India’ drive and says that sale of indigenous products is increasing significantly, particularly in the case of STBs and RF cables.
Amit is a pioneer in STB Manufacturing in the country with the brand ‘My Box’ and laments that the cash game is completely off in the cable TV and broadcasting industry. There is no demand from the large players, both DTH as well MSOs, for the Indian products. To increase sales we have also started giving credit to the operators but still the large operators are not coming to us. One good thing is that 30% to 70% of components are being procured from within India. Unfortunately, India still does not manufacture chips, the main component in an STB.
Amit pointed out that another drawback is the policy of 0% duty on import from the ASEAN countries. Due to preference of imported products over Indian, operators import from these countries. Chinese manufacturers bundle their equipment with their own middleware and CAS cutting down the price resulting in many low quality insecure CAS entering the market. Government has no quality control on these imports. This is the main reason that the India made CAS designed in partnership with the Department of Electronics has not picked up as expected, in spite of being four times cheaper than the imported CAS.
Jayesh Dubey, Vice President of Velankani Group, manufacturer of STBs of ‘PRYSM’ brand says that it is too early to feel the impact of GST. He is optimistic about its positive impact in the long run.
On buying indigenous products by operators, Jayesh comments, “Most of the users go for better rates but over a period of time they are getting conscious of the advantages of buying a Make in India product as it gives them more visibility and control of their orders.”
Velankani Group uses around 35% + of local components for the manufacture and ensures that imported components comply with Indian Standards even if the company has to pay a premium. According to him all PRYSM products are designed and produced from scratch in India. The Group has around 45 warehouses across the country and hence finds no problem in distribution.