The electronics industry, the largest and most rapidly expanding sector worldwide, continues to integrate into all facets of the global economy. The government places significant emphasis on the Electronics System Design & Manufacturing (ESDM) sector, considering it a crucial pillar of both the "Make in India" and "Digital India" initiatives. Consequently, the repair and refurbishment of IT and electronic products have evolved into a substantial industry, valued at approximately $188 billion on a global scale. In developed nations such as the United States and Europe, the high expenses associated with repairing electronic goods have led companies to opt for sending these goods overseas where repair services are offered at more competitive rates due to a combination of skill and cost advantages. Presently, India's revenue from repair services amounts to approximately $350 million. Given India's cost-effective labour force compared to major repair hubs like China, Malaysia, and Indonesia, there exists a compelling business proposition to attract outsourced repair services.
Overcoming logistics barriers and regulatory complexities
Exporting repairs and reimporting returns encounter significant hurdles due to logistics challenges and strict enforcement of Customs and Foreign Trade Regulations. These hurdles result in regulatory complexities and substantial logistical delays. Additionally, Indian repair vendors face difficulties in keeping pace with international counterparts due to elevated financial costs. This limits their ability to consistently modernize infrastructure, cultivate skilled personnel, and effectively compete on a global scale.
The logistics of transporting electronic goods, especially items like mobile phones, tablets, and laptops, pose a unique challenge. Unlike many countries, a significant number of airlines in India restrict the transportation of electronics through air cargo. This limitation contributes to higher logistics timelines, particularly affecting shipments to Western countries, which are a major target market for these businesses. The importance of time cannot be understated in this industry, as delays can severely impact customer satisfaction and business viability. Currently, only a few airlines accept electronics in air cargo, which further complicates the logistics landscape.
However, there's promising news on the horizon. India has initiated a pilot program aimed at enhancing its electronics repair services outsourcing (ERSO) capabilities. The country aims to capture a substantial 20 per cent share of the ERSO market within the next five years. As part of this liberalized framework, companies now have the opportunity to re-export imported goods to non-origin countries – an option that was previously restricted. To expedite processes, the government has committed to streamlining approval procedures, collaborating closely with tax authorities for swift clearances. This concerted effort is geared towards facilitating the seamless entry of devices into India for repairs and expediting their return shipments.
Enhancing trade and repair operations
The policy framework surrounding India's repair services industry must evolve to encourage trade activities, allowing businesses to buy, refurbish, and resell electronic goods internationally. Such flexibility is crucial for tapping into the global supply chain, as the demand for refurbished electronics grows worldwide. Countries in South America, such as Mexico, Brazil, and Paraguay, alongside several Middle Eastern and African nations, are already establishing similar refurbishment facilities.
Allowing trade activities under the policy will enable India to secure a steady flow of products for refurbishment, fostering stronger relationships with suppliers and ensuring consistent business. Furthermore, this approach can mitigate the dumping of e-waste in India by promoting the refurbishment and resale of electronic products both locally and internationally.
On ease of doing business
India faces a significant challenge in positioning itself as an appealing hub for repair services due to extended transit periods for repairable equipment from its arrival to its return journey post-repair. Compared to Malaysia and China, where equipment clearance and transit time take only 1 day, India's process spans 16 days. To foster competitiveness and growth in the Electronics Repair Services Outsourcing (ERSO) Industry, there's a critical need for streamlining and reducing clearance procedures.
To facilitate the thriving and competitive edge of the ERSO industry, the government could spearhead initiatives enabling repair companies to establish hubs in India, including within Special Economic Zones (SEZs), ensuring globally competitive operational costs. Moreover, the establishment of dedicated repair hubs or clusters for ERSO vendors, structured similarly to SEZs or as specified areas within existing SEZs, could be facilitated for the same purpose.
Implementing a time-bound mechanism is crucial. This would involve facilitating the uploading of all necessary documents on a single window before the shipment of repairable goods departs the origin country. By the time it arrives at the destination port, all documents would be vetted, and inspections completed, preventing consignments from languishing unattended at ports, thereby minimizing time and cost overruns.
India should also look to attract more international business, especially from mobile virtual network operators (MVNOs) interested in selling refurbished products. The resolution here is for India to simplify its visa processes. India's safety, multilingualism, and cultural acceptance provide a competitive edge, making it an attractive destination for international clients seeking quality control over the refurbishment process.
Electronic goods beyond repair call for sustainable strategies
Defective goods imported from various sources, unable to undergo repair for multiple reasons, can be directed to recyclers authorized by the Ministry of Environment. Establishing these authorized recyclers within Special Economic Zones (SEZs), in proximity to repair hubs, becomes imperative. This setup would particularly benefit small-scale repair vendors if they're allowed to transfer unrepairable goods to these authorized recyclers situated within SEZs.
Additionally, granting permission for repair vendors to extract functional parts from irreparable units and utilize these salvaged components to repair other defective units could be a viable solution since most of the components are still imported into India. To address this, establishing custom-bonded warehouses for storing components imported for quick delivery to repair shops becomes crucial in this context. This practice of removing and repurposing parts would aid in the repair process, optimizing resources and potentially reducing electronic waste.
Incorporating e-waste processing capabilities within Electronic System Design & Manufacturing (ESDM) facilities also becomes essential. By maximizing the utilization of e-waste, these facilities can contribute to the circular economy, reducing the need to outsource e-waste management to third parties. This integration not only supports environmental goals but also adds value to the repair services ecosystem by ensuring comprehensive waste management.
Emerging trends shaping the industry’s future
The repair industry in India is in its early stages and largely operates informally. Efforts to formalize this sector have commenced, evident in moves like Flipkart's acquisition of Yaantra, a refurbishing and repair services startup, last January. While current instances are limited, companies such as Urban Company have begun offering home repair services for smartphones, laptops, and other common gadgets. Some companies also offer annual maintenance contracts (AMCs) for servicing and repairing consumer gadgets.
On the flip side, while there's a clear increase in the amount of e-waste being collected and recycled annually, the benefits of this have not yet reached Indian companies. Much of the recycled material supplied to manufacturers is exported to countries like China and Vietnam. In India, key components, like high-purity copper, gold, and silver extracted from obsolete printed circuit boards (PCBs), are supplied to wire and jewellery manufacturers rather than the electronics market, since the market is still at an early stage and is yet to grow to drive substantial demand for these materials.
Despite these challenges, with effective policies and collaborative efforts between the government and stakeholders, the electronic repair industry is poised to emerge as a thriving sector in the near future.
Col Suhail Zaidi (Retd) is Director General, Manufacturers’ Association for Information Technology (MAIT). Views are personal.
