Reduce duty on mobile phone parts: ICEA

: 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 categories, the Indian Cellular and Electronics Association (ICEA) said on Wednesday. These shipments can even swell to $50 billion, if India rationalises import duties and undertakes reforms to ease doing business, the industry body said.

The mobile phone industry association has urged the government ahead of the interim budget to have just three import tax slabs of 0%, 5% and 10%, down from seven, so as to simplify tariff applicability and reduce potential litigations. They have argued that reducing the duties will unlock manufacturing competitiveness, which can buoy exports.

The country needs to reorient its strategy from import substitution to exports oriented growth, as 99.2% of the phones sold in India were made locally, the association emphasized. Back in 2014 15, India imported 78% of its phone requirements. “We had asked for higher duties earlier to protect local manufacturing ecosystem, but now if we don’t have lower duties on components and sub assemblies, we will not be competitive in the global market," said Pankaj Mohindroo, chairman of the association.

He added that the lower import duties or zero duties in some components can help India compete with manufacturing countries like Vietnam and Mexico, even as the country aims to lure global value chains away from China. 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. “Over the next two years, the government should begin a glide path for component tariffs because lower tariffs also prevent shift of global value chains away from India while it gives a complimentary PLI scheme," he said.

With the glide path, local production can rise to $82 billion by FY27, higher than $64 billion without the glide path. Lowering of 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 can dramatically 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 association suggested. Mohindroo added that levying higher duties on imports of these components was negating the benefits being offered under the successful production linked incentive (PLI) scheme for mobile manufacturing.

Higher tariffs worked for finished products but not for components, as they were increasing the cost of domestic production by 7 8%. The association has also suggested reducing import duty on mobile phones from 20% at present to to 15%, since local manufacturing of the finished goods had risen exponentially over the past few years.

Livemint tops charts as the fastest growing news website in the world to know more. Unlock a world of Benefits! From insightful newsletters to real time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away!.