The government may put on hold its recent notification advancing the date of levying duties on imported electronic
components under a Make In India plan after handset makers with domestic manufacturing and assembling facilities protested that these levies would increase the cost of locally manufactured mobile phones, making it cheaper to import them and effectively killing some 100-odd plants already set up for assembly.
The government advanced the timetable of its Phased Manufacturing Programme(PMP)earlier this month. Beginning February 1, import of LCD (display panel) assembly, vibrator motor and touch panel were scheduled to attract 12.5 percent countervailing duty (CVD) on imports and excise duty of 1 percent without an input tax credit. The government says it is bringing forward the date by only two months from April 1 to February 1 to coincide with the Budget. But some in the industry had earlier inferred that they could start manufacturing these components locally any time before March 31, 2020, and hence had planned their investments accordingly.
The display panel itself accounts for 25-30 percent of a mobile phone’s production cost and these new duties threaten to disrupt the plans of many handset makers that are locally assembling these phones. These companies point out that currently there is no ecosystem to locally manufacture those high-value components.
Another official said it was the industry itself which had proposed the PMP.: The idea is to make India an electronics manufacturing hub. If this is not working out, we need to pause, understand what additional measures need to
be taken and implement those,” he said.
PMP, launched with much fanfare in mid-2017, was the flagship programme of the government under its ‘Make in India’ initiative which aimed to make India an electronics manufacturing hub by 2025. Each year, the government was supposed to make imports of certain components expensive to encourage companies to manufacture them within the country.
In 2017, the government had increased the customs duty on die-cut parts, receiver and mic, mechanics, keypad and USB cable. However, only USB cable manufacturing has seen the light of day in India.
Various industry associations, including Federation of Indian Chambers of Commerce & Industry, Associated Chambers of Commerce and Industry of India and MAIT, apart from Indian Cellular & Electronics Association (ICEA) and smartphone major Samsung, have written to the government, urging it to postpone the latest phase of PMP — notified on January 8 —by at least one year.
The Korean smartphone maker further said it was in the process of setting up a display assembly plant for mobile phones for which it was investing USD 100 million and the plant was scheduled to become operational by April 1, 2020.
The company has already stopped television production in India in the last quarter with the government imposing 5 percent duty on open cell LED panels — a critical component accounting for 65-70 percent of a set’s production value. It imports finished TV sets from Vietnam.
“So, it now appears that the PMP wasn’t deeply thought through. Only import duty escalation cannot and has never historically lead to the development of an ecosystem,” said Navkendar Singh, associate research director at IDC.
Last month ICEA, which has Apple, Foxconn, Flextronics, Vivo, Oppo and Xiaomi as its members, had also written to the PMO, highlighting, “There is deep distress in the industry, especially in the Indian mobile manufacturing
an ecosystem which holds more than 100 of the 127 factories and it will not be prudent to load an extra cost on this ecosystem.”
It added that even the parts under phase 1and 2 of the PMP were yet to take off.
“We should first focus on establishing these verticals rather than jumping ahead,” Pankaj Mohindroo, president of ICEA, had said in the letter. In 2018, printed circuit board assembly, camera modules and connectors were added to
the list.―Gadgets Now