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Business News/ Industry / Manufacturing/  Import duty on mobile phone components cut to 10% from 15%
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Import duty on mobile phone components cut to 10% from 15%

Import duty on mobile phone parts such as back covers, battery covers, GSM antenna, main camera lens, and other mechanical items of plastic and metal has been reduced to 10%. Move to help in shifting of production lines to India, say analysts

Import duty tax on mobile phone components has been reduced by 5% (Representative Image: Dixon Technologies)Premium
Import duty tax on mobile phone components has been reduced by 5% (Representative Image: Dixon Technologies)

The Centre has reduced import duty on parts used for mobile phone manufacturing to 10% from 15%, in a move to push mobile phone manufacturing in India amid the country's larger focus on exports and becoming a player in global supply chains.

The government lowered the duties for inputs used in making battery covers, main lens, back cover, antennae, SIM sockets and other mechanical items of plastic and metal, it said in a notification.

The reduction in duties comes just ahead of the finance minister Nirmala Sitaraman presenting the interim budget on 1 February.

Industry welcomed the decision. “This is a critical and welcome policy intervention by the government towards making mobile manufacturing competitive in India. Building scale, riding on low input tariffs is key to transforming India into a global hub for electronics manufacturing and exports," said Pankaj Mohindroo, chairman of the Indian Cellular and Electronics Association.

Analysts tracking India's mobile phone sector said that the move can help India compete with manufacturing countries like Vietnam and Mexico, even as the country aims to lure global value chains away from China.

"This initiative is in line with growing scale for facilities, production of key components in India and with an intent to elevate the local manufacturing and reduce dependency on China. This will possibly ensure that the end cost of production is reduced in India, compared to China, with an end objective that the critical ecosystem players currently based out of China, may start thinking of shifting the production base to India," said Navkendar Singh, associate vice-president at IDC India.

He noted that end pricing of mobile phones can be slashed by 1-2% if vendors were to pass on the cost reduction to consumers. However, the cost efficiency in production will certainly help the exports. At present, Apple and Samsung are the big players that are major exporters from India but duty changes like this will push other brands also to start shifting export base to India, he added.

The change in duties addresses to some extent the demand from industry that has been seeking lower duties on imports of inputs that go into manufacturing of mobile phones. The industry had sought lower duties for chargers, adapters and printed circuit board assembly (PCBA) to 15% from 20%, mechanics to 10% from 15% and making the inputs to mechanics duty-free to bolster India’s exports potential.

Components like cells, parts of PCBA, camera module and connectors should attract zero-duty, from 2.5% currently, to enable component manufacturing to take place in the country, which will feed into the cost-competitiveness of mobile phone manufacturing, the ICEA had suggested earlier this month, in its recommendations to the government.

“Electronics has improved from the 9th position a few years ago to India’s 5th largest export in 2024. Mobiles constitute over 52% of electronics exports thanks to the PLI (production linked incentive) scheme. This is the first industry to leapfrog out of import substitution to export-led growth within the last 8 years. The government has been an excellent and willing partner in this transformation," Mohindroo added.

About 99.2% of the phones sold in India were made locally. Back in 2014-15, India imported 78% of its phone requirements. The Indian mobile industry is expected to make about $50 billion worth of mobile phones in FY24, which is likely to rise to $55-60 billion next fiscal year. Exports are likely to rise to about $15 billion in FY24, and then to $27 billion in FY25.

The industry had pitched that mobile phone exports from India can more than triple to $39 billion over the next two years, from $11 billion in FY23, if the government reduces import tariffs on components, and eliminates them in some other categories.

 

 

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ABOUT THE AUTHOR
Gulveen Aulakh
Gulveen covers both corporate and economy, and policy sections of Mint. She also covers telecom, IT from the corporate side and disinvestment, finance ministry from the economy side. Gulveen finds the rare mix of sectors she covers to be incredibly interesting.
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Published: 31 Jan 2024, 09:53 AM IST
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