Duties on Imported Electronic Components May Not Come Into Effect Soon

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The government may put on hold its recent notification advancing the date of levying duties on imported electronic components.

The government is reportedly considering postponing the date of levying import duties on imported electronic components after handset makers with domestic manufacturing and assembling facilities protested that these levies would increase the cost of locally manufactured mobile phones. They also raised concern that import duty escalation would kill some 100-odd plants already set up for assembly in the country, reported Economic Times. 

The government had 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 per cent countervailing duty (CVD) on imports and excise duty of 1 per cent without input tax credit.

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The government said that 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 per cent 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. 

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. Their reason being the absence of ecosystem to locally manufacture those high-value components affected by the latest notification.

Speaking to ET, Navkendar Singh, associate research director at IDC, said that only import duty escalation cannot and has never historically lead to development of an ecosystem.

The English Daily reported that 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 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 1 and 2 of the PMP were yet to take off. 

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